Banking sector criticised for ‘skin deep’ attempts to tackle climate change

The global banking sector is threatening to undermine the Paris Agreement by failing to adequately capture the risks and opportunities of climate change.

That is according to a new report from Boston Common Asset Management, which warns investors that the majority of banks have failed to restrict financing of coal – the most carbon intensive energy source.

In addition, less than half are implementing climate risk assessments or 2˚C scenario analysis, meaning that their investment decisions may not be supported by robust data.

“Too often climate progress is skin deep at best,” Boston Common Asset Management managing director, Lauren Compere, said. “The Paris Agreement has started a race to the low-carbon economy and we need the world’s banks to fund it.

“Some $12trn (£8.5trn) of investment is needed by 2030 in renewable power generation alone, and that is a remarkable opportunity for the world’s banks that they are not currently grasping.”

The report examines the climate management of 59 of the world’s largest banks, finding that they are falling short in areas such as climate strategy, risk management and low-carbon opportunities.

This is reflected in just 46% setting explicit targets to promote low-carbon products and services, while only 41% ensure their trade associations or industry groups adopt progressive climate policies.

In addition, the sector has provided $600bn in financing for the top 120 coal plant developers between 2014 and September 2017, with 61% failing to reduce investments in coal.

Despite this, 54% support the Taskforce for Climate-related financial Disclosures at some level, and 95% have adopted a degree of governance for climate issues internally.

There were also regional differences found, with 80% of European banks undertaking climate-risk assessments, compared with 33% in North America, developed Asia and emerging markets.

“In some areas, and in some individual banks we are seeing encouraging steps,” Compere continued.

“But investors want to see much wider implementation by banks of climate risk assessments or climate scenario analysis if they are to align their business with the Paris Agreement.”

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