Banking giants pledge to align investment portfolios with Paris Agreement

BBVA, BNP Paribas, Standard Chartered and Société Générale have pledged to measure the climate-related impacts of their lending portfolios and assist companies they invest in with aligning their respective sustainability strategies with the Paris Agreement goals.

The four big-name banks have today (4 December) signed a letter committing to align their respective loan books – which collectively cover €2.4trn of assets – with a 2C trajectory.

Under the pledge, the banks will initially focus on their most carbon-intensive areas of investment, such as shipping, aviation and road transport. They will be required to share data on the assets that clients use for production, as well as future investments, with each other in a bid to share best practice.

“This is about more than de-risking – it’s about making a positive impact,” the letter states.

“We will use a science-based, forward-looking approach to financing sector-specific shifts in technology and production processes because it’s not where our clients are today, but where they are heading tomorrow.”

The letter alsoexplains that alignment with a 2C trajectory will mark the beginning of the banks’ actions on climate change, with an ultimate goal of “climate neutrality” to be worked towards on an ongoing basis.

The announcement, which was made at the second day of the COP24 conference in Katowice, Poland, comes after Dutch multinational ING became the first bank to align its investment portfolio with a 2C pathway in September.

To achieve this alignment, ING adopted a new set of metrics called Terra, which assesses how much of a technology shift is needed to keep the rise of global temperatures to well below 2C across each sector it invests in.

Terra then measures the required shift in technology against the actual technology ING’s clients are currently using or are planning on using in the future, enabling the bank to invest in companies driving the low-carbon transition in their respective sectors.

ING’s chief executive Ralph Hamers welcomed the adoption of the same alignment from the other banking giants, claiming that it served as evidence that the finance sector is “becoming increasingly ready to take the bold steps needed to play its part in achieving a low-carbon economy.”

“With a coordinated global effort to fight climate change our impact will only become stronger,” Hamers said. “We hope this is just the beginning.”

The Blue Planet effect

In related news, Scottish insurance and investment firm Standard Life Aberdeen has this week unveiled plans to create a new £200m ethical fund, financed by retail investors.

The fund, which is predicted to have raised the £200m sum from stock market floats by mid-December, will be invested in projects driving progress towards one or more of the Sustainable Development Goals (SDGs), such as clean energy projects or schemes championing gender equality.

Global Sustainability trust founder Andrew Dykes claimed the decision to launch the fund was borne not only from the growing trend towards sustainable investment among millennials, but from the awareness raised by the BBC’s Blue Planet 2 series in 2017.

“Blue Planet brings the purpose of the trust to life – a wealth manager may watch it and think things need to change,” he explained.

The launch of the fund comes at a time when the UK’s socially responsible investing (SRI) market is growing rapidly, with Triodos predicting that it will grow by 173% by 2027 to reach £48bn.

Similarly, the global green bonds market is believed to have grown by a staggering 78% between 2016 and 2017, with national and institutional investors funnelling more than $150bn into low-carbon projects during the 12-month period.

Sarah George

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