• Atmospheric CO2 /Parts per Million /Annual Averages /Data Source: noaa.gov

  • 1980338.91ppm

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  • 2001370.57ppm

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  • 2019410.07ppm

  • 2020412.44ppm

  • 2021414.72ppm

  • 2022418.56ppm

  • 2023421.08ppm

News & Views

Global firms call for transition pathways and carbon tax

The second instalment of NZI's Putting a Price on Pollution Series looks at the lobbying activities that surround key anti-pollution policies

Various financial firms are breaking the status quo by calling for stronger anti-pollution measures, even if the industry as a whole remains conservative.

A consensus is forming around the need for clear transition pathways, carbon taxes, and mandatory emissions trading schemes.

This is true not only for smaller, radical sustainability players, but even some large firms with large exposures to carbon intensive and pollutant industries. 

For example, BNP Paribas Asset Management, Brunel Pension Partnership, and ABP have all told Net Zero Investor that the success of the green transition depends on such measures. Incentives and soft rules, such as disclosures, are insufficient to realise the scale of change within the needed timeframe.

Influence Map, an NGO that tracks the lobbying of financial firms, has also told Net Zero Investor that certain notable members of the insurance community, notably Aviva, Allianz, and Axa, also support more ambitious policymaking.

“We need policy certainty over a long timeframe in the form of sector transition pathways, with clear phase out plans backed by the state,” said Faith Ward, Chief Responsible Investment Officer for Brunel Pension Partnership and Chair of the Institutional Investors Group on Climate Change (IIGCC). 

“It’s already been done for petrol cars. Now is the time for an equivalent in steel, aviation, chemicals, and other high impact sectors The lack of clarity can tie firms into knots.”

Fiduciary duties

One such knot is the current conflict between long-term and near-term fiduciary duties. 

For example, 2022 was an exceptionally profitable year for oil and gas companies, meaning pension funds like Brunel Pension Partnership that have pursued an ambitious albeit “voluntary” climate policy have been put at a disadvantage decarbonising their portfolios in the near-term, albeit consistent with fiduciary duty when viewed over the longer term.

Only clear transition pathways and carbon pricing can effectively remove the first mover disadvantage.

“We have pushed the envelope as far as we can,” Ward added. “I believe we have hit the limit as to what an enlightened fiduciary can do under the current public policy framework without putting our primary purpose to deliver investment returns to pay pensions at risk.”

Dominique Dijkhuis, Head Of Investment at ABP, Europe’s largest private pension fund, said governments, companies, science and financial institutions “need to steer in the right direction” and price in negative externalities, such as C02 emissions. 

Progressive firms, such as ABP, cannot achieve a sustainable economy on their own. Carbon taxes and extensions to emissions trading schemes to make them mandatory constitute effective interventions.

“We've been pushing for carbon taxes rather than compulsory exclusions or a brown penalising factor because we think that carbon taxes or indirect taxes via mandatory emission trading systems are more efficient drivers of innovation and investment,” said Patrick Simion, CEO Chief of Staff at BNP Paribas Asset Management.

BNP Paribas Asset Management’s argument is that taxing the “externalities” properly makes it easier for professional investors and banks, which engage with corporates at the “micro level”, to assess how well a company is transitioning.

Simion said that the kind of carbon taxes needed would depend on the individual jurisdiction, its economy and legal system. Since carbon taxes aren’t financial regulation, financial firms “aren’t well placed” to make detailed requests to governments. 

Carbon taxes are notoriously tricky to get right, and can have unintended consequences, such as negative impacts on the poorer, more vulnerable sections of society.

Global firms call for transition pathways and carbon tax

The “gilets jaunes” protest movement in France is a good example of the kind of political fallout that results from uneven policymaking. The protestors weren’t necessarily opposed to the carbon tax; their anger was directed at the unfairness of it.

BNP Paribas Asset Management’s engagements with industry associations and policymakers rarely deal with the issue of carbon taxes directly.

Rather, they are general insistences on the need for long term visibility on the price of carbon and the role carbon taxes and mandatory emissions trading schemes can play. However, policymakers never want to commit to anything concrete to industry representatives.

In addition to the individual voices of global firms such as BNP Paribas Asset Management, Brunel Pension Partnership, ABP, and others, there is a strong tradition among smaller sustainability-focused financial firms in advocating for stronger anti-pollution measures. Italy’s Banca Etica is one such organisation.

“In order to foster innovation and accelerate the green transition, we need clearly defined limitations,” said Ugo Biggeri, president of Eticasgr, an Italy-based, sustainability-focused investment fund. 

“Until governments clarify what is possible to finance and what is not, we won’t see the paradigm shift that is necessary for establishing a truly sustainable economy.”

Biggeri cited the “success story” of the ozone recovery as a clear example of how limitations can achieve the necessary change, as the phasing out of chlorofluorocarbons enabled stakeholders to focus their resources on finding a technological solution. These days, the ozone “hole” is almost closed.

“That innovation wasn’t a result of policymakers asking companies to be nice and spend money in finding a solution,” he added. “It happened because a worldwide ban on chlorofluorocarbons forced affected firms to find an alternative.”


In order to foster innovation and accelerate the green transition, we need clearly defined limitations.

Ugo Biggeri
Global firms call for transition pathways and carbon tax

In addition to pushing for carbon taxes, transition pathways, and mandatory emissions trading schemes, activist firms such as Eticasgr also advocate for other radical measures, such as a brown penalising factor, the application of environment-focused due diligence laws to financial firms, sustainability-friendly reforms to fiduciary duty, and a brown taxonomy. These latter measures tend to be unpopular among the larger firms, even the more progressive ones.

Negative Lobby

It is important to remember that the individual voices of progressive firms calling for transition pathways and carbon taxes face a relentless negative lobby whose aim is to preserve the status quo by blocking radical measures and watering down existing initiatives.

In a world that is still 80% fossil-fuel based, there is clearly a lot of money at stake.

According to Influence Map, the major finance associations, be they the representatives of insurers or fund managers or banks, tend to take the same conservative position of supporting soft regulations, such as disclosures (albeit in simplified forms with longer voluntary periods), and opposing harder measures that might have a direct economic impact on polluting firms. The boards of these associations tend to be dominated by the same global firms.

“We're at an interesting inflection point in terms of policy positions of financial firms,” said Simon Zadek, executive director at Nature Finance.

“There's an unholy combination of pressure to do more, pressure to do less, particularly coming out of the US, but also elsewhere, and an unstable profit horizon that drives a shorter term time perspective.”

The financial community as a whole, “if such a thing exists,” tends to resist any additional tax on its investment portfolios, according to Zadek. Nor does it wish to make voluntary carbon markets mandatory.

There is also a risk that alliances such as GFANZ, ostensibly set up to deliver on net zero ambitions, end up becoming de facto “trade associations” that comply with the lowest common dominator.

For example, a number of GFANZ members recently signalled an unwillingness to adopt the higher standards proposed by Race to Zero. US companies, particularly those under pressure from Republican states, have taken especially conservative positions.

“The larger a coalition becomes, the more difficult it is to be ambitious,” Zadek continued. “Unfortunately, that’s the logic of collective action.”

Often more progressive policy positions for global firms come down to individual leadership. For example, Zadek attributed a large part of Aviva’s progressive outlook to the “excellent” leadership of Steve Waygood.

However, the leadership factor is also a double-edged swords. As CEOs come and go and companies morph into other shapes, the legacy of a more enlightened leader doesn’t always endure for long.

Loud versus quiet

“Part of the problem is that the negative lobby is very loud, but the positive lobby is very quiet,” said Piet Sprengers, manager of sustainability strategy at ASN Bank.

“There is a nervousness, especially among the larger firms, to be more outspoken on these issues, even if they do have more progressive policy positions. What I miss is a positive lobby from financials and other companies in favour of environmental regulation.”

One clear example of the negative lobby is the recent debate in the Dutch parliament around stopping credit insurance for fossil fuel products. As of January 2023, Dutch businesses and banks are supposed to be no longer eligible for export credit insurance for new projects in the fossil energy sector.

However, the Dutch government is now looking to weaken this initiative by creating delays and exceptions, thanks to an exceptionally strong lobby in the Netherlands, according to Sprengers.

The companies fuelling the negative lobby tend to be those involved in oil and gas projects in the global south, in countries such as Brazil and the Philippines.

The main argument, which is a generic one used to combat almost every anti-pollution measure, is that large companies will move elsewhere if the limitations are too severe and the economy will suffer as a consequence. Shell, for example, has already moved from The Hague to London, and other companies could follow suit.

“The lobbyists also say that limitations shouldn’t be imposed at the national level but at the EU level,” Sprengers continued. “But then their next step is to lobby for watering down EU regulation. Just look at the green taxonomy, which includes nuclear and gas and potentially airplanes. The pressure to preserve the status quo is very strong.”

That said, there are smaller groups, such as Corporate Social Responsibility Netherlands, which are attempting to change the status quo.

Sprenger hopes that, in the future, such groups will also include global firms, or the positive lobby risks being drowned out by the negative lobby.

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