Banks are increasingly integrating climate change into their strategies, with many setting net zero emission targets, a report has found.
Yet, a vast majority are still lagging behind in comprehensive climate commitments across all financing activities. This emerges from the latest analysis by the Transition Pathway Initiative’s (TPI) Global Climate Transition Centre.
The Transition Pathway Initiative, founded in 2017, operates under the umbrella of asset owners and is buoyed by asset managers. It evaluates companies’ readiness for shifting to a low-carbon economy and bolsters climate change mitigation efforts. In 2022, the Grantham Research Institute on Climate Change and the Environment launched the TPI Centre to shed light on financial and corporate sectors’ transition journey.
Financed emissions from activities like lending, investment banking, and advisory usually overshadow financial institutions’ operational emissions. These can often be hundreds of times higher. For this analysis, the TPI Centre scrutinised 26 top global banks using its Net Zero Banking Assessment Framework. The criteria ranged from banks’ net zero pledges to their disclosure and financing for climate solutions.
While the majority of these banks have embraced a net zero financed emissions objective, the depth and breadth of these commitments vary. A whopping 77% have declared net zero intentions by 2050. However, only half of this lot have specified which financial activities fall under this commitment. Furthermore, just one bank has an all-encompassing pledge covering all its financial undertakings.
The study noted an uptick in firms setting decarbonisation targets for high-pollution sectors. From a mere 33% in 2022, 85% of banks now have sector-wise targets. But these ambitions aren’t always aligned with the 1.5°C global temperature limit, especially in sectors like oil & gas and electric utilities. Alarmingly, certain high-pollution industries like food and mining lack any targets.
Regarding disclosure, 69% of these banks now report absolute financed emissions for at least one sector, a surge from 33% in the previous year. The report also delved into banks’ sustainable finance practices. Around 70% have goals to funnel more financing into climate solutions. Yet, clarity is amiss, with a handful defining what “climate solutions” entails.
Transition Pathway Initiative’s Global Climate Transition Centre said, “Our 2023 assessment points to an uptick in banks’ climate initiatives. More banks are charting emission cutback targets, covering more sectors. However, embedding climate-centric decisions across all banking functions remains a colossal task.”
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