A group of investors with over USD2tr of assets has backed a report that criticises the banking sector’s “skin deep” attempts to capture climate risks and opportunities.
The report examining climate management by 59 of the world’s largest banks has found urgent shortcomings that threaten to undermine efforts to support the transition to a low carbon economy.
THe Banking on a Low Carbon Future report by Boston Common Asset Management warns that in areas such as climate strategy, risk management and low carbon opportunities the banking sector is failing to embed climate into its core practices.
The report finds that: Less than half (49 per cent) of banks are implementing climate risk assessments or 2C scenario analysis, which means decision-making on portfolio shifts is not supported by robust data, only 46 per cent of banks set explicit targets to promote such products/services. Moreover, a majority of banks (61 per cent) have failed to restrict the financing of coal.
However the report does commend the banking sector for some advances including knowledge-sharing and collaboration around climate risks and solutions, and it praises the 95 per cent of banks that have adopted at least some degree of governance for climate issues internally or have open disclosure.
Whilst a majority might have failed to prevent coal financing, the report does find that 71 per cent have adopted public exclusion policies linked to such carbon-intensive practices (such as tar sands).
The report is part of an investor engagement programme also Banking on a Low Carbon Future, that has been running since 2014 and this year’s analysis was the first to align its metrics with the new Taskforce on Climate-related Financial Disclosures (TCFD) climate risk.
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