Superficial progress: Global banks failing to deliver time-bound climate strategies
A new report has accused the banking sector of superficial progress when it comes to climate commitments, noting that uptake in low-carbon services, green bonds and reporting standards isn't being matched by demands to decarbonise portfolios.
The report, published today (11 November) by Boston Common Asset Management (BCAM), stated that 40% of banks are failing to develop financing and investing restrictions or exclusions on high-carbon portfolios and business clients.
The report engaged and analysed 58 of the world’s largest banks, including HSBC, JP Morgan Chase, MUFG and BNP Paribas. It found that 69% of banks endorsed the Task Force on Climate-related Financial Disclosures (TCFD's) recommendations and 78% had carried out climate risk assessments. However, the report noted that the green bond industry had grown from $1bn in 2009 to more than $175bn in the last decade, a figure that is dwarfed by investment the $1.9trn dedicated to fossil fuels between 2016 and 2018.
BCAM’s Lauren Compere said: “The scale of the climate crisis demands a more radical transformation of the banking sector.
“Our findings indicate a systematic reluctance by banks to demand higher standards from high carbon sector clients, despite the fact that doing so could vastly reduce bank risk and accelerate action on climate change.”
Timebound targets required
In response, BCAM is calling for banks to set clear, timebound strategies for restrictions and phase-outs for financing fossil fuels and deforestation. The report found that 60% of banks have such policies for emissions, but just 16% had them for deforestation. In fact, the report called for banks to set targets that increase the proportion of sustainable finance commitments relative to their overall financing activities. Just 45% of banks have done so.
The report comes weeks after 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.
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. The announcement was shortly followed by news that investors collectively controlling $2.4trn of assets will work to make their portfolios carbon-neutral by mid-century.
In the UK, banks have allocated almost £150bn of funding for fossil fuel projects since the start of 2016 and continue to collectively hold 146 investment pots in firms driving significant levels of rainforest deforestation.