Banks to be assessed against new net-zero standard

Investors have launched a new standard setting out their expectations for credible net-zero plans in the banking sector and will publish their first assessment of banks this summer.

Banks to be assessed against new net-zero standard

The new standard has been developed by the Institutional Investors Group on Climate Change (IIGCC), which convenes more than 400 investors with more than $65trn of assets under management collectively. IIGCC produced the standard in partnership with the TPI Centre at the London School of Economics.

Under the standard, banks can assess their long-term net-zero commitments and interim targets, as well as their exposure to high-carbon sectors and their strategies for engaging to drive decarbonisation in these sectors.

The standard also covers investments in climate solutions and engagement – directly and indirectly – with green policymaking.

Areas are additionally included to measure a bank’s climate-related governance and its requirements for clients to deliver a just net-zero transition.

As a first step, the IIGCC and TPI Centre will assess 26 banks against the standard and publish the findings later this summer. The assessment will be global and cover banks including CitiGroup, Goldman Sachs, HSBC, ING, JP Morgan, Morgan Stanley and Societe Generale.

The launch of the new standard comes after multiple rounds of consultations with investors and a pilot study assessing 27 banks last year. This pilot revealed that while ever-more banks have top-line net-zero commitments and interim targets, disclosure on implementation is still very inconsistent.

IIGCC chief executive Stephanie Pfeifer said: “Due to the nature of their activities, banks have an outsized role to play in whether the global economy successfully decarbonises or not. For investors with net-zero commitments, many of which will include investments in banks, it will therefore be vital to engage with banks over their transition plans in order to fulfil their own commitments.”

Earlier this year, a major report revealed that global banks have collectively funnelled more than $5.5trn into the fossil fuel sector over the past seven years and, while US-based banks have been the biggest contributor, the UK and France are also in the top five. This is despite most of these banks now having net-zero commitments.

Separately, another 2023 analysis concluded that just 7% of financing from global banks for energy companies went to renewables between 2016 and 2022.

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