While here in America, the backlash against ESG investing and decarbonization is growing, back in Europe, many financial institutions are doubling down on their climate commitments, setting in motion a flying wheel with large ramifications.  

That dynamic was at full display this week at Building Bridges, a sustainable finance conference set up by the Swiss finance community and the United Nations. At a session I attended on “Net-Zero alliances”, Swiss Re executive Claudia Bolli summarized her company’s conundrum as follows: “Climate change is a business risk, and it is on our balance sheet. The question is: can we keep it on the balance sheet?”

Already, she said, there are certain areas where the Swiss financial giant has decided the answer is “no”: “We have that for example with the coal industry. They may end up with stranded assets,” she said. In the near term, energy security concerns may prevent Swiss Re from acting on that assessment. But in the long term, “it is very clear” where the reinsurer is headed.  Business sentiments like these matter, especially from Swiss Re. The company is the world’s second largest reinsurance company, twice as big as Berkshire Hathaway, for instance, backstopping many insurers in a variety of ways. If it stops (re)insuring coal-related investments, the latter will face higher costs, and possibly, become un-investable.

The kicker? Swiss Re has already said that it will do just that: by 2030 in the OECD, and 2040 elsewhere, their coal-related insurance products will end.This kind of cold financial calculus may explain why—at least for now—nearly none of the 500 banks, asset managers and other financial institutions who signed up for the “Glasgow Financial Alliance for Net Zero” (GFANZ) last year have quit the coalition since the U.S. backlash against ESG took off.As a case in point: when I asked Judson Berkey, the American UBS executive in charge of engagement with policymakers and regulators, whether his company’s recent blacklisting by the state of Texas would affect his company’s commitment to net-zero, his answer was negative. [emphasis added]

CEO Daily, FORTUNE