Banks representing one-third of global market to align with Paris climate targets

Collectively

The move, made at the UN’s Climate Summit in New York, will see the banks work to align their portfolios and practices with the UN’s Principles for Responsible Banking. Collectively, the participating banks manage $47trn in assets.

Launched on Sunday (22 September), the Principles for Responsible Banking commit signatories to operate in line with “individuals’ needs and society’s goals”, including the Paris Agreement and the Sustainable Development Goals (SDGs). The framework additionally includes commitments to set and regularly review public, time-bound, numerical sustainability targets; collaborate with clients, customers and other stakeholders to maximise positive impact, and to maintain transparency and accountability.

By signing up to the Principles, banks state a belief that “only in an inclusive society founded on human dignity, equality and the sustainable use of natural resources” can their clients, customers and businesses thrive.

Signatories include Barclays, Santander, BNP Paribas, RBS, UBS, Lloyds China’s Industrial Bank, DNB, Citi and Credit Suisse.

The UN’s hope is, given that the banking industry covers 90% of financing in developing countries, that Principles will help spur a low-carbon transition which protects and benefits those most vulnerable to climate change impacts.

“A banking industry that plans for the risks associated with climate change and other environmental challenges can not only drive the transition to low-carbon and climate-resilient economies, it can benefit from it,” the UN Environment Programme’s executive director Inger Andersen said.

“When the financial system shifts its capital away from resource-hungry, brown investments to those that back nature as a solution, everybody wins in the long-term.”

Nonetheless, the UN was keen to highlight the fact that the Principles allow signatories to choose between alignment with the Paris Agreement’s more ambitious 1.5C trajectory or its 2C pathway. Research from the IPCC has found that this half-degree difference is likely to have sizeable impacts on human health, biodiversity and the global economy.

“More ambition, backed by a step-change in investment from the private sector, is needed to tackle these challenges and ensure that humanity lives in a way that ensures an equitable share of resources within planetary boundaries,” the UN stated.

Terra approach

In related news, Dutch bank ING has published the first progress report on its so-called Terra approach – a framework designed to align its €600bn lending portfolio with the Paris Agreement’s 2C trajectory.

Terra uses detailed data on the assets companies use for their production today, as well as future investment plans, to ensure alignment. To date, ING has developed Terra methodologies for the power generation, fossil fuel, automotive, shipping, aviation, steel and cement sectors, as well as commercial real estate and residential mortgages.

Through analysing its holdings in these sectors, ING has developed several new time-bound sustainability targets, set out publicly in the progress report. These include eliminating thermal coal mining and coal-fired power generation from its portfolio by 2025 and reaching net-zero for real estate in 2040, along with launching a “net-energy-positive” mortgage portfolio by 2050.

ING has also emphasised the importance of collaboration in helping the banking sector to align with key climate goals. At last year’s COP summit in Katowice, Poland, BBVA, BNP Paribas, Standard Chartered and Société Générale committed to follow ING’s lead and align their books with a 2C trajectory – and are all due to report on their progress before the end of 2019.

Green finance at edie’s Sustainability Leaders Forum

edie’s Sustainability Leaders Forum returns in 2020, as some of the biggest companies, individuals and organisations championing sustainability gather at the Business Design Centre on 4 & 5 February.

Green finance will be a key discussion point, with speakers including Green Finance Institute CEO Rhian Mari Thomas, M&G Investment’s head of responsible investment and ESG Anita McBain and Aviva Investors’ global head of governance Mirza Baig. 

Other keynote speakers at this flagship, multi-award-winning event features include Mary Robinson, former President of Ireland; Rebecca Marmot, Unilever CSO; Tom Szaky, TerraCycle CEO;  and Gilbert Ghostine, Firmenich CEO. For details and to register, visit: https://event.edie.net/forum/

Sarah George