BCAM slams banks on climate risk readiness

Ian Rogers
Just 78 per cent of banks carry out climate risk assessments, a study by Boston Common Asset Management shows.

That's 78 per cent of 58 of the world's largest banks, meaning 45 banks, "including the likes of HSBC, JP Morgan Chase, BNP Paribas and MUFG" BCAM said.

"The research identifies some progress in terms of governance with a majority, 69 per cent, of banks endorsing the Taskforce on Climate-related Financial Disclosures guidelines."

On disclosing TCFD governance reforms, Boston Common found 71 per cent of banks in line.

Boston Common's Lauren Compere said that, "the scale of the climate crisis demands a more radical transformation of the banking sector. Our findings indicate a systematic reluctance by banks to demand higher standards from high carbon sector clients, despite the fact that doing so could vastly reduce bank risk and accelerate action on climate change."
 
The report calls for "a cultural shift within banks from the board all the way down to the frontline manager bringing in new business. This must include a willingness to walk away from clients or to no longer issue new financing once existing obligations are paid off."
 
Specifically, the BCAM report calls on banks to:

•    adopt a clear strategy for decarbonizing balance sheets, including clear timelines for restrictions and phase-outs of financing for fossil fuels and deforestation;
•    set explicit targets to increase the proportion of sustainable finance commitments relative to their overall financing activities, noting that 45 per cent of banks have yet to set any such objectives;
•    publicise their definitions of 'low-carbon' and 'green' investment, noting that some green finance commitments appear to be merely re-allocations or rebranding of existing commitments; and
•    integrate public policy on climate into overarching climate strategy, engage trade associations on adopting progressive climate policies, and use the company's public voice to promote progressive climate policy with governments and regulators.