Banks Told They're Lagging on Response to Climate Risks

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  • Under 50% of banks have hard targets for low carbon products
  • Most banks failing to ingrain climate strategy into business
How to Hit the Brakes on Climate Change

Fewer than half the world’s biggest banks are doing enough to forestall climate change that poses risks to their markets and economies.

Most lenders still aren’t producing firm targets for low-carbon financial products that will aid efforts to keep temperatures from rising, according to a survey of 59 banks conducted by Boston Common Asset Management LLC. Even the strongest banks in the survey, including Goldman Sachs Group Inc., still struggle to define a climate strategy at the heart of their business, according to the report published Thursday and backed by more than 100 institutional investors. 

Scientists predict higher frequencies of floods, famines and superstorms unless the world keeps temperature rises well below 2 degrees Celsius (3.6 degrees Fahrenheit) this century.

Goldman Sachs was cited as a leader in the report after the investment bank set a 2025 target of $150 billion in clean energy financing and investing. It also released a clean energy impact report in 2016 that examined the impact of the $41 billion in green investments.

Almost half of the groups have put in place climate risk assessments and 61 percent haven’t restricted the financing of coal. The global banking sector provided $600 billion in financing for the top 120 coal plant developers between 2014 and September 2017, according to the report.

Could Do Better?

Selected banks' Bloomberg environmental disclosure score

Source: Bloomberg

Score based on the extent of a company's public environmental disclosure, out of 100

Boston Common called for all banks to disclose climate risk in line with the Taskforce on Climate-related Financial Disclosures. They should also set clear targets to promote low carbon products and publish strategy reports aligned with the Paris Agreement, according to the recommendations.

“Since 2005, when Goldman Sachs established its Environmental Policy Framework, harnessing market-based solutions to address environmental challenges has become increasingly core to our business,” said Kyung-Ah Park, head of the Environmental Markets Group at Goldman Sachs. “Our $150 billion target of financing and investing in companies that promote clean technology and renewable energy is an example of our commitment to addressing climate change.”

Barclays and the BBA industry group in London had no immediate comment.

About $12 trillion of renewable energy investments are needed by 2030 as countries that signed the Paris Agreement transition to low-carbon economies. The shift presents a "remarkable opportunity" for the world’s banks, said Lauren Compere, managing director at Boston Common Asset Management.

"Investors want to see much wider implementation by banks of climate risk assessments or climate scenario analysis if they are to align their businesses with the Paris Agreement," she said. Most banks have already taken steps to implement at least some internal governance for climate issues, along with disclosure on low-carbon products and services. 

The TFCD was set up by Bank of England Governor Mark Carney in his role as head of the Financial Stability Board. In December 2015, Carney named Michael Bloomberg, founder and majority owner of Bloomberg News and its parent company Bloomberg LP, to lead the panel, which also includes executives and advisers from a variety of industries around the world.

Of the 59 banks surveyed, 46 responded and 12 banks were analyzed using publicly-available information.

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