We are quickly running out of time to avoid catastrophic climate impacts, and bank lending, as the world’s largest source of finance, will play an outsized role in the shift to a clean energy economy. Sixty global banks have provided the fossil fuel industry with $4.6 trillion in financing since the Paris Agreement was signed. It is imperative that bank lending shifts quickly from supporting a fossil fuel economy to enabling one based on clean and sustainable energy, transport, agriculture, and manufacturing systems.
Bank lending determines not only which projects move forward and which don’t, but because banks are uniquely able to create money and credit, they wield an influence over companies and projects that few other entities can approach. In short, bank lending has the power to make or break energy, agriculture, and manufacturing markets, and to heavily influence how those markets affect the climate.
Investors are calling on banks to assess and manage the climate risk embedded in their lending and investment portfolios. Measuring and managing a bank’s salient risk – the risk to society – will require measuring its financed emissions using tools like those available through the Partnership for Carbon Accounting Financials (PCAF).
Featured Initiatives
Pressing Top Banks & Insurers to Cut Emissions. Climate change continues to fuel increasingly severe global natural disasters, including floods, hurricanes, droughts, and wildfires. Financing by banks and insurance companies is helping to prolong the dominance of fossil fuels in our energy supply, which delays the transition to a clean energy economy. While several major banks and insurance companies have begun to acknowledge their role in exacerbating climate risk, most have failed to adopt adequate interim targets to meet their net zero by 2050 commitments.
For the 2023 proxy season, investors continue to engage banks actively on greater accountability in climate lending and net zero plans.
Featured Resources
Corporate Climate Transition Plans: A guide to investor expectations,”IIGCC, March 2022. IIGCC, in collaboration with TPI, released an investor-led framework of pilot indicators assessing 27 banks in six key areas – net zero commitments; short- and medium-term targets; decarbonisation strategies; climate governance; climate policy engagement; and audit and accounts.
Banking on Climate Chaos: Fossil Fuel Finance Report 2022. This report adds up financing (lending, and underwriting of debt and equity issuances) from the world’s 60 biggest banks for the fossil fuel sector as a whole, as well as for top expanders of the fossil fuel industry and top companies in specific sectors.
FinanceMap’s Finance and Climate Change Assessment. A comprehensive climate assessment of financial institutions. Includes scoring and assessment of each bank's: Fossil Fuel Exposure; Portfolio Paris Alignment; Climate Governance, Targets & Policies; Policy Engagement & Stewardship.
Bank net zero commitments. An assessment of bank decarbonization commitments by signatories to the Principles for Responsible Banking and the Net Zero Banking Alliance.
