By Lauren Compere, Managing Director
Banking on a Low-Carbon Future: Finance in a Time of Climate Crisis is Boston Common’s fifth annual study of how global banks are managing climate risks and opportunities. It builds on last year’s report, which shifted emphasis from bank policies to implementation and action. Our report finds that the explosion of risk assessment tools and green banking industry initiatives in recent years has had little impact on commercial behavior including the expansion of fossil fuel financing. We are now facing a climate crisis, and global emissions are not expected to peak by 2030. Time for incremental change is over. We need to see transformation in the banking sector.
Our report calls on companies to:
Transform corporate culture and mindsets
- Adopt group-wide climate strategies overseen by the board, with robust implementation throughout the organization from the C-Suite down to front-line managers.
Change financing priorities and procedures
- Adopt a clear strategy for decarbonizing balance sheets, including clear timelines for restrictions and phase-outs of financing for fossil fuels and deforestation
Measure, report, reward
- Set explicit targets to increase the proportion of sustainable finance commitments relative to their overall financing activities, noting that 45% of banks have yet to set any such objectives
Engage and collaborate
- Commit to making 2020 a “year of action” in alignment with the Paris Accord, focused on decarbonization goals and climate solutions.
Speak! Use the company’s public voice
- 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.
As stewards of capital, we call for resource reallocation in support of new business models. We commend the leaders in this space, but call for boards and managements to take on much more ambitious, decisive change. This is necessary to manage the significant, imminent risks of climate-related changes affecting all businesses and assets they finance, while also enabling and profiting from the significant opportunities in society’s transition to a low-carbon future.
Lauren Compere of Boston Common Asset Management 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.”
Thanks to our regional partners Australian Ethical Investment (Australia), SHARE (Canada), and Ethos (Switzerland) for their involvement in this report.
For more information, please feel free to contact Lauren Compere, Managing Director at lcompere@bostoncommonasset.com
The information in this article should not be considered a recommendation to buy or sell any security.
