Copyright Reuters
October 29 - After the Net Zero Banking Alliance became the latest climate alliance to close its doors, its supporters put on a brave face; its detractors cheered. But the eulogists largely avoided questions about whether the U.N.-convened NZBA and other climate alliances accomplish anything meaningful – or whether, as their harshest critics allege, they are breaking the law. So, it's worth asking: Are climate alliances effective aids to battle climate change, dangerous cabals conspiring to harm consumers, or modestly useful self-help groups for firms trying to kick the risky emissions habit? Over the last few decades, various voluntary private-sector alliances have formed to address the overwhelming scientific evidence that greenhouse-gas emissions are harming us all. While we can’t see rising greenhouse gas levels, we can measure them, and more directly experience their implications in the form of rising temperatures, rising losses from extreme weather, public health emergencies due to heat, and so on. In the case of the NZBA, the original goals were ambitious: “a breakthrough in mainstreaming climate finance,” with its 43 inaugural members (a who’s who of major banks with assets of $28.5 trillion) intending to set emissions targets and advocate for a transition to net zero. Other similar sectoral groups – of insurers, asset managers and asset owners – emerged at roughly the same time, with similar objectives. Some of these groups made grand pronouncements about their aims and likely impact. They stopped short of collective action, aware of legal prohibitions. Still, they were the target of political and legal attacks from both left and right. From the left: that they had not done enough (greenwashing and virtue signaling). From the right, of doing too much: violating antitrust laws, harming their investors, or succeeding in challenging the hegemony of the fossil-fuel industry. These latter accusations were not coming just from think-tanks, but rather state attorneys general, state treasurers and, more recently, the Trump administration. The dueling attacks shared a common feature: they lacked solid evidence. In a recent Harvard Business School working paper, we selected one sector (financial services), collecting data on every publicly traded firm with market capitalization over $10 billion for over 20 years. We identified each firm’s membership in 11 major alliances, along with data on a host of activities. Testing for both the potential benefits and harms of alliance membership, we used econometrics to separate causal relations from mere association: what we can attribute to membership, rather than to the sorting of firms who chose to join alliances. First, the benefits: Were firms that joined more likely to reduce their own emissions; to lobby in favor of pro-climate policies; to fund green technologies? In every case, we found membership had salutary benefits compared with pre-membership behavior and to non-members. For example, members adopted nearly 50% more environmental policies and reduced their own emissions by about 28%. We then examined critiques, testing whether alliance members showed evidence of anti-trust behavior; of starving fossil fuel producers of funding; of harming their own shareholders; or of being two-faced by lobbying against pro-climate legislation. In no case did we find any statistically significant evidence to support these charges. These non-results are not the product of weak data or poor methods, because the same data and methods were powerful enough to uncover benefits (at least if you think that addressing climate change is important). So, does the end of these alliances mean we have lost powerful, vigorous groups that have aggressively and successfully pushed to reduce greenhouse gases? No. Have we squelched a dangerous cabal where competitors have joined together to illegally boycott emitters and wantonly harm their own shareholders? No. Rather, we’d liken climate alliances to self-help groups. Like a circle of dieters who meet regularly, they succeeded in creating broad guidelines for healthy behavior, a way to publicly share goals and progress, toolkits to turn guidelines into action, and they petitioned stores to stock healthier products. But ultimately, each decided what to buy and eat in the privacy of their own homes. And in private, they were more likely to substitute diet soda and low-calorie snacks for less healthy alternatives, but not yet fully change their lifestyle by eating considerably less or exercising. Will firms stay the course without mutual support? It’s too early to tell and there’s considerable other anti-climate pressure, especially in the U.S. But in the absence of a planetary miracle drug, in the form of a new technology or government action, mutual-support societies remain a useful instrument for change. A recent 28-country survey shows that 65-70% of people think collaboration is important to achieve a healthy planet and environment. Common sense and research agree: Tackling hard problems benefits from mutual support. Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Ethical Corporation Magazine, a part of Reuters Professional, is owned by Thomson Reuters and operates independently of Reuters News. Peter Tufano is a Baker Foundation Professor at Harvard Business School and Senior Advisor at Harvard’s Salata Institute for Climate and Sustainability. His research focuses on climate finance and climate alliances, and he created a climate finance doctoral research reading group at over 150 institutions. Tufano was Dean of the Saïd Business School at the University of Oxford from 2011-2021. Matteo Gasparini is a former BiGS Fellow at Harvard Business School. His work focuses on climate finance and climate alliances. He holds a PhD from the University of Oxford and has been External Advisor to McKinsey & Co.
