Report: Less than half of global banks have sustainable energy finance commitments
Just 23 of the world's largest 50 banks have outlined commitments to invest more in renewable energy and less in fossil fuels, a new report from the World Resources Institute (WRI) has concluded.
Published to mark the launch of the organisation’s Green Target tool, which is designed to measure and compare the strength of sustainability commitments made by finance firms, the ‘unpacking green finance’ report ranks 50 of the worlds’ largest private banks based on their policies and actions in financing the clean energy transition.
It concludes that more than half (27) of the banks have not made public targets with a “common, transparent accounting methodology” in this space.
Moreover, the 23 banks which had made this move spent, on average, twice and much financing on fossil fuels than clean energy projects between 2016 and 2018. The report warns that progress in this field may continue to be slow, given that only seven banks had yearly numerical targets for capping fossil fuel financing or increasing renewable energy spending.
It additionally highlights trends towards banks making long-term commitments without considering implementation strategies and focusing on a single aspect of the sustainable development agenda – for example, prioritising environmental over social concerns, or improving financing without addressing their own operations.
“If banks are serious about sustainability and stepping up to address the climate change challenge, we would expect to see a shift in how their sustainable finance commitments compare with their fossil fuel finance,” the WRI’s head of sustainable investing Giulia Christianson said.
“For now, most banks’ annualized commitments are considerably less than what they provide to fossil fuels on an annual basis.”
The WRI’s findings echo those detailed in a recent report from NGO BankTrack and commissioned by Triodos Bank UK, examining investments made in fossil fuel projects since the Paris Agreement was ratified in late 2015.
The report states that banks invested £150bn in fossil fuel-related projects, including £45bn on expanding existing oil and gas sites and £13bn on new fracking projects, between January 2016 and July 2019.
Similarly, a separate report from BankTrack and Global Witness found that global banks have been slow to stop financing agri-food giants which have been linked to rainforest deforestation. Forests are widely regarded as a crucial component in meeting the aims of the Pairs Agreement.
Another damning report, from investor coalition Boston Common Asset Management, found progress towards the Equator Principles - a voluntary global environmental and social risk management framework for financial decision-making – is lagging.
Pressure on banks for these trends to be bucked is now coming not just from green groups like those behind these reports, but the general public and policymakers as well.
As a result, a coalition of 130 banks, representing one-third of the worldwide banking sector, committed to aligning their actions with the aims of the Paris Agreement at the recent UN Climate Action Summit in New York. The pledge was shortly followed by news that investors collectively controlling $2.4trn of assets will work to make their portfolios carbon-neutral by mid-century.