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The report “Banking on a Low-Carbon Future: Finance in a Time of Climate Crisis” highlights the slow pace of change when it comes to greening the financial system.
Efforts to green the financial sector have been “largely superficial,” the report says, with banks “failing to change their lending or investment practices” as a result of sustainable finance initiatives.
Researchers who collected data for the report engaged 58 of the world’s largest banks, including the likes of HSBC, JP Morgan Chase, BNP Paribas and MUFG.
Their findings paint a stark picture. Although a great majority of banks (69%) have endorsed the guidelines by the Taskforce on Climate-related Financial Disclosures (TCFD), few have translated them into practice.
As a result, financing for fossil fuel projects continues to rise each year, totalling $1.9 trillion in 2016-2018 (€1.7 trillion), the report found.
“The time for incremental change is over,” the authors wrote in the report’s introduction. “The scale of the climate crisis demands a more radical transformation of the banking sector,” said Lauren Compere of Boston Common Asset Management.
“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,” Compere said in a statement.
To turn this around, the report calls for “a cultural shift within banks,” saying this “must include a willingness to walk away from clients” who do not adopt science-based carbon-cutting strategies.
Specifically, the report calls on banks to decarbonise their balance sheets and adopt “clear timelines” to phase-out financing for fossil fuels and deforestation projects.
Full report “Banking on a Low-Carbon Future: Finance in a Time of Climate Crisis”
Related article on Financial Times (subscription required)