The study warns that in areas such as climate strategy, risk management and low-carbon opportunities, the banking industry is failing to embed climate action into its core practices.

It found that less than half of banks (49%) are implementing climate-risk assessments of 2C scenario analysis, while even less (46%) have set explicit targets to promote low-carbon products and services.

Most banks (61%) have failed to restrict the financing of coal. In fact, the sector reportedly provided $600bn in financing for the top 120 coal plants between 2014 and September 2017.

And only two in five banks (41%) encourage trade associations or industry groups to adopt progressive climate policies.

It is believed that $12trn of investment is needed in renewable power generation by 2030 to keep the world in line with the Paris Agreement targets.

But banks are currently failing to grasp this “remarkable opportunity”, according to Lauren Compere, managing director at Boston Common Asset Management, which has led the investor coalition.

“In some areas, and in some individual banks, we are seeing encouraging steps forward but too often climate progress is skin deep at best,” she said.

“Investors want to see much wider implementation by banks of climate risk assessments or climate scenario analysis if they are to align their businesses with the Paris Agreement.”

Better disclosures

This year’s analysis was the first to align its metrics with the new Taskforce on Climate-related Financial Disclosures (TCFD) framework introduced by Bank of England governor Mark Carney and Michael Bloomberg.

The report found that more than half (54%) of banks support TCFD at some level. Barclays, for instance, has already performed a gap analysis to compare its reporting against the TCFD recommendations.

But only two out of 59 banks have asked their carbon-intensive sector clients to adopt TCFD recommendations.

The investors call on banks to disclose their climate-risk in line with TCFD guidelines, and publish a company-wide strategy aligned with the Paris Agreement.

“As a first step, the TCFD framework provides an agreed global framework for financial institutions to report their climate-related risks Banks must use it,” Compere added.

Banks are also urged to set clear targets to enhance low-carbon products or services, and to influence their trade associations to take progressive positions on climate legislation.

Fossil fuel financing

The UK’s high street banks are still profiting from some of the world’s dirtiest fossil fuel projects despite committing to deliver the Paris Agreement goals of limiting global warming to below 2C.

Barclays, HSBC, Lloyds and RBS have barely changed their lending policies or actions in the two years since the deal was signed, according to a previous report from charity organisation Christian Aid.

Last September, more than 100 investors with $1.8trn under management wrote to the chief executives of 60 of the world’s largest banks, including HSBC and Bank of America, calling for better disclosure and implementation on climate risks in their investment portfolios.

George Ogleby

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie