# Analysis-Global climate coalitions need safer harbour from antitrust turbulence
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-05
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Global Companies Seek Guidance on Climate Alliance
Meta Description: Legal experts urge governments to provide clear guidelines to global companies forming alliances to combat climate change to avoid antitrust risks.
URL: https://financedigest.com/analysis-global-climate-coalitions-need-safer-harbour-from-antitrust-turbulencehtml

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LONDON (Reuters) -Global companies that form alliances to help them to tackle climate change need clear “safe harbour” guidelines from governments to allay fears they could be tripped up by antitrust rules, legal experts said.

Hundreds of companies have banded together into various groups with pledges to reduce carbon emissions to net zero by mid-century.

But there is limited guidance from governments and regulators on how far they can collaborate to reach that goal without overstepping antitrust boundaries.

Zurich Insurance Group on Wednesday said it was quitting an [industry](https://www.financedigest.com/how-can-the-insurance-industry-avoid-having-a-kodak-moment.html "How can the insurance industry avoid having a ‘Kodak Moment?’") grouping of insurers focused on cutting carbon emissions. That followed Munich Re’s unexpected [announcement last week that it was leaving the group](https://www.financedigest.com/incentive-fm-group-announces-latest-strategic-me-acquisition.html "INCENTIVE FM GROUP ANNOUNCES LATEST STRATEGIC M&E ACQUISITION") – the Net Zero Insurance Alliance (NZIA) – to avoid antitrust risks.

The German reinsurer on [Friday quit group less than two years](https://www.financedigest.com/extraordinary-rollercoaster-good-friday-talks-remembered-25-years-on.html "‘Extraordinary rollercoaster’, Good Friday talks remembered 25 years on") after co-founding the coalition, part of the Glasgow Financial Alliance for Net Zero (GFANZ) umbrella group of sectors pushing to decarbonise.

Alec Burnside, a partner at law firm Dechert, said both [Britain and the European Commission had offered](https://www.financedigest.com/britain-urges-banks-to-offer-mortgage-flexibility-in-cost-of-living-crisis.html "Britain urges banks to offer mortgage flexibility in cost-of-living crisis") “relatively timid” guidance when what was needed were “explicit safe harbours for companies.

There should be [confirmation in the guidance](https://www.financedigest.com/snam-confirms-guidance-after-rise-in-first-quarter-sales.html "Snam confirms guidance after rise in first quarter sales") coming out of antitrust agencies to re-assure companies committing to GFANZ,” he said.

Also last week, a Danish [pension scheme](https://www.financedigest.com/how-britains-pension-scheme-hedge-became-a-trillion-pound-gamble.html "How Britain’s pension scheme hedge became a trillion pound gamble") said it could quit the Net Zero Asset Owner Alliance because of a perceived lack of ambition among peers, which several sources said stemmed from fears of attracting antitrust lawsuits.

The antitrust tensions mark a further setback to GFANZ several months after U.S. [asset manager](https://www.financedigest.com/britains-post-brexit-asset-management-revamp-eyes-liquidity-tokenisation.html "Britain’s post-Brexit asset management revamp eyes liquidity, tokenisation") Vanguard pulled out, citing a need to express its own views independently to investors.

LACK OF SPECIFIC GUIDANCE

The European Union and [Britain have published draft guidelines on how companies](https://www.financedigest.com/britain-toughens-up-diversity-targets-for-uk-companies.html "Britain toughens up diversity targets for UK companies") can co-operate within the law, but have not released guidance specific to financial institutions and net-zero alliances.

A European Commission spokesperson said its guidance, to be finalised in June, is designed to show agreements with a “genuine [sustainability objective”](https://www.financedigest.com/why-coding-needs-to-be-re-evaluated-for-sustainability-objectives.html "Why coding needs to be re-evaluated for sustainability objectives") will not violate antitrust laws, and that some will benefit from exemptions.

[Britain’s competition regulator in February explained how it would ease rules](https://www.financedigest.com/britain-plans-new-data-rules-to-ease-compliance-burden.html "Britain plans new data rules to ease compliance burden") to ensure businesses were not “unnecessarily or erroneously deterred” from collaborating.

Businesses can get exemptions if they demonstrate a [climate change](https://www.financedigest.com/exclusive-world-bank-seeks-more-funds-to-address-climate-change-other-crises-document.html "Exclusive-World Bank seeks more funds to address climate change, other crises -document") agreement between companies meets four conditions, including provision of benefits such as promotion of economic progress and that consumers will gain.

In the U.S., some Republican politicians have highlighted the potential antitrust implications of these climate groups.

They have been threatening court action as part of a broader attack on environmental, social and [governance investing](https://www.financedigest.com/chinese-love-affair-with-manchester-property-to-strengthen-as-government-welcomes-new-investment.html "Chinese love affair with Manchester property to strengthen as government welcomes new investment"). U.S. authorities are yet to [offer companies](https://www.financedigest.com/navigating-a-buoyant-ma-market-does-the-deal-corridor-with-the-us-or-eu-offer-british-companies-the-better-scope-for-growth.html "Navigating a buoyant M&A market: Does the deal corridor with the US or EU offer British companies the better scope for growth?") any formal protection.

Some legal [experts said that while they believe](https://www.financedigest.com/from-implant-chips-to-green-web-hosting-heres-what-experts-believe-the-future-of-the-internet-will-look-like-2.html "From implant chips to green web hosting, here’s what experts believe the future of the internet will look like") the antitrust fears to be overblown, the risk is that members of alliances will use them as a reason to quit.

Keith Johnson, CEO of Global Investor Collaboration Services in Minnesota, who advises asset managers and owners on fiduciary duties and governance, said Republicans may not have much legal ground for their arguments but they might still get executives to dial [back their ESG efforts](https://www.financedigest.com/mifid-ii-why-you-should-not-scale-back-your-implementation-efforts.html "MIFID II: WHY YOU SHOULD NOT SCALE BACK YOUR IMPLEMENTATION EFFORTS").

It’s not as much as the actual liability exposure as it is the intimidation factor,” he said, noting that [companies would want to avoid the hassle of litigation even if they can ultimately win](https://www.financedigest.com/incentive-fm-group-wins-contract-with-global-events-company.html "Incentive Fm Group Wins Contract With Global Events Company").

MORE CAUTIOUS

When it gave guidance in January, NZIA made clear members were committed to complying with regulations, including antitrust laws, and were free to make their own policies and [set their own carbon reduction targets](https://www.financedigest.com/eu-sets-recycling-reuse-targets-to-cut-packaging-waste.html "EU sets recycling, reuse targets to cut packaging waste").

Munich Re said its [concerns were linked to the relative market share](https://www.financedigest.com/shares-slip-yields-rise-as-u-s-data-sparks-rate-hike-concerns.html "Shares slip, yields rise as U.S. data sparks rate hike concerns") of NZIA, which has 29 members representing around 15% of insurance premiums sold, globally.

The Net Zero Asset Owner Alliance (NZAOA), which Munich Re also belongs to, has 85 members managing $11 trillion against more than $126 trillion in [global invested](https://www.financedigest.com/volkswagen-to-invest-in-mines-in-bid-to-become-global-battery-supplier.html "Volkswagen to invest in mines in bid to become global battery supplier") assets. Munich Re said given that ratio, the [associated risks](https://www.financedigest.com/mcafee-highlights-emerging-cybersecurity-risks-associated-with-blockchain.html "McAfee Highlights Emerging Cybersecurity Risks Associated with Blockchain") were “significantly lower,

Munich Re also said it remained committed to its own climate targets, and it has restrictions on [financing and underwriting of some fossil fuel business](https://www.financedigest.com/6-ways-to-spring-clean-your-business-finances.html "6 ways to Spring clean your business finances"), including new oil and gas fields.

Zurich said it wanted to focus its resources “to [support our customers](https://www.financedigest.com/make-it-personal-how-banks-can-better-support-sme-customers-in-q4.html "Make it personal: How banks can better support SME customers in Q4") with their transition” and that it remained committed to its sustainability ambitions, but did not elaborate further on its reasons for leaving the NZIA.

Reuters contacted its 17 other members, three of which confirmed they would remain members. The other 14 declined to comment or did not respond to requests for comment.

Aviva said it remained committed to NZIA as achieving net zero was “something companies cannot do in isolation”.

Allianz said the net-zero [alliances were world-leading in their efforts to mitigate climate change](https://www.financedigest.com/from-boom-to-bottom-and-now-big-change-renault-and-nissan-reshape-alliance.html "From boom to bottom and now big change: Renault and Nissan reshape alliance") and that it continued to chair the NZAOA.

Grupo Catalana Occidente told Reuters that because the path to net zero was still being decided, assessing antitrust concerns was “not possible, at this stage”. Its NZIA membership is a “firm commitment to climate neutrality”, it said.

Ben Caldecott, director of the Oxford [Sustainable Finance](https://www.financedigest.com/improving-sustainability-finance-effective-lifecycle.html "Improving sustainability in finance with an effective IT lifecycle") Group at the University of Oxford, said that anti-competition concerns were used as a “smokescreen” for some companies that do not want to adhere to the requirements of a climate alliance. He said this made it all the more urgent for regulators to provide better clarity.

“These alliances depend on momentum,” said Caldecott. “If they start to lose critical mass it becomes potentially existential.”

(Reporting by Virginia Furness, Isla Binnie, Tommy Reggiori Wilkes, Simon Jessop, Ross Kerber and Tom Sims; Editing by Greg Roumeliotis and Jane Merriman)


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