Banking giants show 'superficial progress' tackling climate change

Despite some progress carrying out climate risk assessments over the last five years, the world's largest banks continue to lend to and invest in highly polluting sectors.

That is according to a global study of 58 banks, which found that 40% have failed to develop any new financing restrictions or exclusions for high-carbon industries.

This is despite 69% having endorsed investment guidelines from the Task Force on Climate-related Financial Disclosures (TCFD), and 78% carrying out climate risk assessments.

And although the green bond industry has grown from $1bn to $175bn over the last decade, this is dwarfed by $1.9trn of investment in fossil fuels between 2016 and 2018.

Boston Common Asset Management (BCAM), which published the study today, said that banks are demonstrating “superficial progress“, and that practical change “remains elusive“.

“The scale of the climate crisis demands a more radical transformation of the banking sector,“ said BCAM director of shareholder engagement, Lauren Compere.

Our findings indicate a systematic reluctance 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.“

HSBC, JP Morgan Chase, BNP Paribas and MUFG are among the 58 banks included in the study.

It found that over 80% have announced low-carbon products and services, but that 45% do not set explicit targets to increase the proportion of sustainable finance commitments relative to overall activities.

In addition, just 50% engage with high-carbon clients on transition strategies, and only 12% ask them to adopt TCFD guidelines.

The researchers called on banks to adopt a clear strategy for decarbonising balance sheets, including precise timetables for phasing out financing for fossil fuels and deforestation.

They also urged banks to publicise their definitions of “low-carbon“ and “green“ investments after finding that some financing appears to be re-allocations or rebranding of existing commitments.

Integrating public policy on climate into an overarching strategy, engaging trade associations on progressive climate policies, and promoting policy with governments and regulators, are also recommended.

The study calls for “a cultural shift within banks from the board all the way down to the front-line manager bringing in new business“.

This must include a willingness to walk away from clients or to no longer issue new financing once existing obligations are paid off.“

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