The 28 largest banks in the world are making progress on climate change issues, but investors feel they are still not doing enough, according to a new report by Boston Common Asset Management, a wealth management firm that focuses on sustainable investing.
The report, titled “On Borrowed Time,” concludes that the 28 largest banks are failing to align their business practices and lending procedures with targets to keep global temperature increases below 2 degrees. The banking sector as a whole is not doing enough to measure and manage the material risks from carbon-intensive sectors, and this is a major concern to investors, says Boston Common.
Most of the banks are beginning to talk about environmental factors, but few are turning these discussions into action. Only 35 percent of banks disclosed goals for energy efficiency lending, and less than 40 percent have set targets for renewable energy financing. Half have linked the implementation of climate change goals to executive compensation.
Large investors interviewed by Boston Common say they want banks to introduce climate change goals and link compensation to climate strategy.
They would also like the banks to establish targets to reduce exposure to sectors vulnerable to climate change and increase investments in renewable energy and energy efficiency. The banks also should use their public voice on climate action to encourage better government policy aligned with lowering the average worldwide temperature by 2 degrees, the report says.
“Boston Common is encouraged by the marked progress at many of the largest global banks in addressing climate change, and commends their willingness to hold in-depth discussions and advance the dialogue around climate risk,” the report says. “However, the core conclusion that the banking sector as a whole is not doing enough to measure and manage the material risks from carbon-intensive sectors is a major concern to investors.
“For example, bank lending and investment to carbon-intensive sectors such as coal mining, extreme oil such as Arctic drilling or liquefied natural gas continues to significantly outpace green financing. In the past three years, European and North American banks have financed $786 billion to some of the most carbon-intensive sectors,” according to the report.