Banks are far from meeting Paris climate targets, groups warn

By ED DAVEY, Associated Press

The world’s most influential banks must significantly step up climate efforts if they are to keep global temperature rises within the Paris Agreement’s habitability targets, a group of institutional investors warned in an assessment published on Thursday.

Efforts by 27 giant banks in North America, Europe and Asia to match their policies to a maximum of 1.5 degrees Celsius (2.7 Fahrenheit) of global warming are falling far short in every area measured in a pilot study exclusively obtained by Associated Press. The report notes that no bank has committed to ending funding for new oil and gas exploration, and only one has pledged to cut all funding for coal in line with International Energy Agency guidelines.

The bank’s assessment was prepared by the Institutional Investors Group on Climate Change (IIGCC), whose more than 350 members are primarily asset managers and owners, including Barclay’s Bank UK Retirement Fund, BlackRock and Goldman Sachs Asset Management International. According to the IIGCC website, members of the group have 51 trillion euros ($52 trillion) in assets under management and advisory. This amounts to about a tenth of all assets held by financial institutions worldwide. The Transition Pathway Initiative, a research group that tracks corporate emissions, co-authored the report.

The assessment is significant because it comes from the financial community and echoes the idea that investment in fossil fuels should be phased out, which environmentalists, climate scientists and energy experts have argued for years.

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Witold Henisz, associate dean of environmental, social and governance initiatives at the Wharton School of Business, said the study “makes a compelling case that banks are not yet showing significant progress toward net zero and often even their own commitments.” A growing body of research shows that low public rankings shame companies into responding, he said — and investors can punish them.

He added that any quibbles over the methodology “will not change the high-level conclusion above”.

The study assessed banks on six areas where they would need to show progress if their lending and other services are aligned with strong emissions reductions: the strength of net zero pledges; short- and medium-term emission targets; decarbonisation strategies, namely exit plans from polluting industries; lobbying for climate regulation; how climate risks are reflected in accounts and audits, and governance, meaning how climate risks are integrated into management structures.

Evaluators set criteria for each area. Banks were ranked by how much they scored. A score of 100% would mean that the bank is fully aligned with the Paris goals in this category.

In their commitments to reduce the emissions in their portfolios to zero, the banks have reached a total of 20%. For the short- and medium-term climate goals, which show the way to net zero goals, only 10% of the indicators were achieved. And the report finds that 1% of banks’ lobbying practices are compliant with the 1.5°C target.

“The level of urgency needs to increase,” said Natasha Landell-Mills, head of custody at investment manager Sarasin and Partners and co-chair of the IIGCC task force. “Banks still have a long way to go.”

As gatekeepers of the world’s money, banks play a key role in climate change, the study says. With financing, they enable new fossil fuel projects. They decide whether to lend money to coal mines and to agribusinesses that have cut down the tropical rainforest. There are other sources of financing, especially private capital, which plays an increasingly important role, but banks remain the most important.

The study finds that two-thirds of banks have committed to achieving net zero, but these commitments “vary widely”. The study notes that only UBS is committed to being net zero across its operations.

The four Chinese banks in the report, Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China, have not committed to net zero emissions, the study found. They were the worst rated institutions, each scoring zero in five of the six rated categories.

AP repeatedly asked these banks for comment, but none responded.

Each year, a body known as the Financial Stability Board, based in Basel, Switzerland, and established by the G20 heads of state and government, assesses which banks in the world are the most influential, based on size and how involved they are in the world. financial system. The four most influential banks in the world in 2021 — JPMorgan Chase, BNP Paribas, Citigroup and HSBC — were rated zero in two or three areas in the assessment. Climate governance was the only category where everyone was judged to be making significant progress.

Citigroup and JPMorgan declined to comment by email. In the spring of 2021, both banks announced targets for aligning the company’s practices with the Paris target.

In a statement, BNP Paribas said it had made new climate commitments, including a 25 percent cut in oil financing, from February 25, the latest date included in the survey. The Bank reaffirmed its commitment to a carbon-neutral economy by 2050 and to limiting global warming to 1.5°C. BNP Paribas has introduced “pioneering policies” to protect the climate and biodiversity, especially in forests, she said. It will gradually reduce its exposure to companies that do not decarbonize quickly enough.

An HSBC spokesman said by email that the bank is also committed to net zero, adding: “We recognize that our global footprint means we can play a key role.” The IIGCC report “acknowledges the progress we have already made,” she said, including a commitment to phase out coal funding. The bank is reviewing its climate and energy policies, a spokesman said.

Scientists say emissions need to fall sharply in the short and medium term, so the 2030 and 2035 benchmarks are crucial. Only three banks, Barclays, ING Bank and Société Générale, have published short-term targets to reduce emissions from the activities they finance, the study reveals. Nine of them announced medium-term goals. This is “problematic”, the study said, because the targets help investors gauge how serious banks are about decarbonisation.

“If too many banks plan to roll back emissions, global emissions will not be curbed quickly enough,” the authors wrote.

On deforestation, which can release huge amounts of carbon dioxide when forests burn, only HSBC has made a comprehensive commitment to stop funding, the study says.

“Despite all the boardroom awareness, there is no change at the strategic level,” said James Vaccaro, CEO of the Climate Safe Lending Network, which works to decarbonize the banking sector.

Vaccaro, who has 20 years of leadership experience in sustainable banking and investment, added that there are “reasons for hope given the dismal state of banking today.” He singled out Barclays for praise and said its goals were very broad.

Bank lobbying, which can try to influence and weaken climate laws, has also diverted it far from the 1.5°C path, the study said. And it found that the banks were not ensuring that their trade associations lobbied in accordance with the agreement. Only Bank of Montreal discloses all of its trade association memberships on its website and in reports.

Bill Weihl, a former head of sustainability at Facebook and Google who has campaigned against lobbying groups, said by email that the findings explain why climate policy has repeatedly failed to be implemented. “We need to see the private sector step up and use its powerful influence to win climate policy.”

None of the banks link directors’ salaries to emissions, the study notes.

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