Almost all financial institutions’ climate impact and risk is driven by the activities they finance in the wider economy, yet the data suggests that this is not yet where the focus is for a large number of institutions.
- 49% of financial institutions indicate they do not conduct any analysis of how their portfolio impacts the climate at all.
Only 25% of disclosing financial institutions report their financed emissions – 84 financial institutions worth US$27 trillion of assets.
For those 25%, on average, reported financed emissions are over 700x larger than reported operational emissions.
2. On top of providing green finance, the finance sector must become green. While there are signs of financial institutions committing to align their portfolios with a net zero carbon world, much work still needs to be done.
The analysis shows just how key portfolio alignment is for financial institutions, those that have a low-carbon transition plan are mostly already taking actions to align their portfolio.
45% of banks are taking actions to align lending portfolios. 48% of asset owners and 46% of asset managers are aligning investments. Only 27% of insurers are aligning underwriting portfolios, suggesting insurers’ transition plans are currently focused on their investments.
To continue to thrive, financial institutions will need to align their portfolios with a net zero carbon world; clear short- and mid-term milestones such as science-based targets for their portfolios can help them in achieving this.
3. Financial institutions definitely see opportunities for returns on financing the transition to a low carbon, deforestation free, water secure future – 76% see opportunities in offering sustainable finance products and services.
They highlight opportunities including sustainability-linked loans, green and transition bonds, sustainable investment funds and insurance solutions – with potential financial impact up to US$2.9 trillion
There are indications these opportunities could be realized, with potential impact outweighing the cost to pursue for most opportunities.....
moer at CDP
© CDP - Carbon Disclosure Project
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