While Mark Carney has been pursuing his political aspirations in the race for the Liberal leadership, the cause he’s put at the centre of his career has been eroding around him.
Carney’s life as an international figure has operated between two poles: finance and climate. As a central banker and corporate figure he’s sought to promote sound economics and opportune investment. As a United Nations representative he resolutely championed the battle against climate change. For years he’s argued the two can live happily together to the benefit of both.
A key focus of his environmental efforts has been the unfortunately acronymed GFANZ, the Glasgow Financial Alliance for Net Zero. Launched in 2021 while he served as UN Special Envoy on Climate Action and Finance, it’s a vehicle to gather the world’s banks, financial institutions and corporate leaders in a concerted effort to ensure investment for net zero projects and support the objectives of the Paris climate accord.
Designed to be more than just another global talking shop, its members were required to establish a set of parameters that could be measured to demonstrate progress. As its leading light, Carney didn’t stint from portraying the challenge in apocalyptic terms.
“As financial policymakers and prudential supervisors, we cannot ignore the obvious risks before our eyes,” he warned in 2019. “If some companies and industries fail to adjust to this new world, they will fail to exist.”
The alliance quickly attracted hundreds of members keen to demonstrate their eagerness to do good. Lately, however, resignations have been pouring through the mail slot.
The biggest American banks started the retreat, with Goldman Sachs, Morgan Stanley, Citigroup, JPMorgan Chase and Bank of America all pulling out, as did New York-based BlackRock, the world’s biggest asset manager. Canadian banks soon after joined the flight, with Bank of Montreal, National Bank, TD Bank, CIBC and Scotiabank all backing away. Britain’s Financial Times reported that European bankers are also threatening to follow suit unless the rules requiring them to track and report on their progress are eased.
None of the departing members have offered detailed reasons for their exit, other than to assert they can work just as effectively to support climate initiatives on their own. But the motive is no secret: they’re afraid of Donald Trump and the aggressive new energy policies in Washington, and of legal challenges to green investing operations.
On his first day in office Trump issued a flood of directives castigating “burdensome and ideologically motivated regulations” on U.S. energy producers, cancelling Biden administrative green initiatives and withdrawing from the Paris accord.
Many in the new Republican Congress see environmental, social and governance (ESG) investments as a plot against the energy industry. A suit launched by Texas’ attorney general Ken Paxon in December accuses BlackRock and other investment giants of “conspiring to artificially constrict the market for coal through anticompetitive trade practices,” of operating as a “cartel” and of “deliberately and artificially constricting supply” to increase prices and “produce extraordinary revenue gains.”
The UN grouping — which Carney left to seek the Liberal leadership — has announced changes weakening its initial strictures and allowing institutions to work with the group without having to join or meet the Paris climate goals. Yet in a blow to another Carney-affiliated organization, the U.S. Federal Reserve, the world’s most powerful central bank, said it was withdrawing from The Network of Central Banks and Supervisors for Greening the Financial System, co-founded by Carney in 2017 to “mobilize mainstream finance to support the transition toward a sustainable economy.”
It too has come under assault from Republicans who see it as another covert means of subverting energy production. Without going into details, the Fed said in a statement it was leaving the group due to an expansion of its activities “covering a wider range of issues that are outside of the board’s statutory mandate.”
Brookfield Asset Management poured billions into renewable energy investments during Carney’s term as chairman. As an advisor to Britain’s Labour party he supported plans to establish a $13 billion seed fund in support of high-risk green projects and is said to favour a similar project for Canada. He’s also come out in favour of altering the way governments calculate their debt that would offset spending by including the value of “national assets” in the calculation.
While Carney’s international climate initiative is crumbling, Conservative leader Pierre Poilievre’s pledge to “axe the tax” looks increasingly like a fait accompli. Carney’s main rivals for the leadership have indicated they’d either freeze or cancel the plan. Carney told a Senate hearing in May the tax was “not working as it should” but had “served a purpose up until now” and challenged anyone planning to cancel it to come up with something better. He hasn’t offered specifics on how he’d improve on it.
In any case, opinion has shifted sharply since then. The bankers’ retreat reflects a shifting dynamic. Canadians supported Ottawa’s climate plan as long as they considered it a reasonable and affordable approach to a perplexing problem, even though Canada’s emissions represent little more than a trickle against the outpourings from other sources and nothing we achieved would significantly alter the larger situation. Approval declined as people increasingly saw it as flawed, expensive and geographically unfair.
It all works as evidence the political climate has changed. The world has found bigger dangers to frighten it. The primary challenge of the next four years will be a search for security and certainty against the disruptive storm blowing out of Washington.
Canada’s approaching contest will not be a carbon tax election. That ship has sailed. The task for the contending parties is to demonstrate to Canadians they have the talent and ideas to deal effectively with a bigger and more immediate threat.
National Post