The world’s biggest banks are failing to take climate change seriously in their business plans, as demanded by regulators, according to research to be published today by a large investor group.
Less than half of the 59 international banks surveyed by Boston Common Asset Management have carried out a scenario analysis for if global temperatures rise by more than two degrees Celsius, as desired by Bank of England governor Mark Carney.
Carney has been among the most prominent voices pushing for a greater focus on climate issues among big banks, but the research shows serious catch-up is still needed. Only 46 per cent of banks have set explicit targets to promote environmentally friendly schemes.
Green finance projects have been growing in importance for big banks, with announcements of major commitments to environmentally friendly schemes from HSBC and Barclays before Christmas. Green bond issuance will reach $250bn in 2018, according to forecasts by Moody’s.
However, issues remain. HSBC pledged $100bn in green finance, but did not commit to stopping finance for coal projects in developing markets. The Boston Common research shows that more than three in five banks have not restricted their financing of coal, widely thought to be among the most carbon-intensive fuels.
Previous research by the Share Action group focused on the UK's banks only found that Royal Bank of Scotland, Lloyds Bank and Standard Chartered were particular laggards – while French banks were leading the way.
Lauren Compere, managing director at Boston Common Asset Management said: “In some areas, and in some individual banks, we are seeing encouraging steps forward but too often climate progress is skin deep at best.
“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.”
Banks have made more progress on putting in place the correct governance structures, with 93 per cent implementing some form of oversight.