Vancity tops Sustainable Banking Revenues Ranking

The pace of governments and private institutions making net-zero strategy commitments has been relentless in recent years. Banks have a particularly vital role to play, as conduits to the crucial investment capital that will finance the economy-wide transition. Yet if the world’s ambitious decarbonisation targets are to be met, the scale and of pace of sustainable financing activity will need to increase considerably.

This is why, together with the sustainable economy research and media organisation Corporate Knights, we have produced a new Sustainable Banking Revenues Ranking. This analyses how much of their overall revenue banking institutions are deriving from sustainable lending, investments and underwriting, highlighting the scale of activity across industry and which specific banks are leading the way. 

The ranking is based on the highest sustainable revenue ratio — the highest share of overall revenue — rather than the highest absolute sustainable revenue total. This means that smaller institutions stand just as a good a chance of doing well as larger banks. And that has been borne out this year with Vancity, a credit union serving Vancouver and other communities in British Columbia, Canada, topping the ranking. Although the big banks will clearly play a larger role in financing the transition to a sustainable economy, institutions of all sizes will have a role to play.

“What gets funded, gets done,” says Toby Heaps, co-founder and CEO of Corporate Knights. “The climate action revolution must be funded, or it won’t happen. Banks are ground-zero for originating the $9tn to $10tn per annum in financing that is going to be required to deliver on the Paris Agreement.

“And now that we have a critical mass of banks — 40% of global balance sheets — represented in the Net-Zero Banking Alliance (NZBA), committed to playing their role in financing and making climate transition a reality.”

He continues: “We wanted to bring some gumption to that. The ranking provides a sense of where the industry is now and will enable us to track progress, and hopefully see things speed up.”

This is the first year The Banker and Corporate Knights have produced this ranking, and we believe it will provide a useful reference point and focus for discussion in the industry. In time, we hope that the depth of possible analysis will increase, along with the number of institutions included, as financial institutions expand and deepen their levels of reporting.

2022 Sustainable Banking Revenues Ranking

A zero in the outstanding sustainable loan book and/or total sustainable underwriting volume columns denotes that data was unavailable, either because it is not relevant to that bank or it was not disclosed.

Source for all tables: Corporate Knights

Top performers

Three smaller institutions topped the rankings: Vancity; SpareBank 1 Østlandet, Norway’s fourth-largest savings bank; and US union-owned Amalgamated Bank, with sustainable revenue ratios of 34.13%, 23.04% and 19.47%, respectively.

Christine Bergeron, president and CEO of Vancity, says: “We’re a credit union that has been in business for over 76 years, and being member-owned has shaped us over the decades. We’ve always had core pillars around environmental sustainability, social equity and co-operative values, and we’ve continued to lean into those values in our activities.”

Those three institutions were followed in fourth to seventh positions by Intesa Sanpaolo, Commerzbank, JB Financial Group and Investec, with ratios of 6.72%, 6.54%, 5.21% and 5.04%, respectively.

Bettina Storck, head of group sustainability management at fifth-placed Commerzbank, comments that the bank has “established an overarching and integrated internal governance in order to steer sustainability throughout the whole bank,” and that “sustainability is one of the four cornerstones of our strategy”.

“We want to mobilise €300bn for sustainable products by 2025,” she adds. “This represents a threefold increase compared to €100bn at the end of 2021, which is the baseline for our growth in this area.”

Driving sustainable lending and investment

The ranking is significant not only as a measure of how banks are performing relative to each other, but also to measure the progress the industry is making overall in supporting vital sustainable investment.

Corporate Knights’ Mr Heaps observes: “If we look at the global requirements of $9tn to $10tn per annum in financing for climate solutions, somewhere in the region of 5% of the $180tn or so total banking assets are going to need to be deployed on a revolving basis. When we get to that 5% figure, we’ll have a good indication that banks are playing their fair role.”

Only seven out of the 60 institutions in the ranking have sustainable revenue shares of 5% or more. Although measuring revenue earned from sustainable activities is obviously different to measuring assets deployed towards sustainable activities, there is a clear link.

Mr Heaps points out that for some of the world’s largest banks, it is likely their sustainable revenue ratio is likely already above 5%, but given the lack of detailed disclosure it is not possible to verify this.

Highest overall totals

When looking at total sustainable revenues, Intesa Sanpaolo tops the table with $3.68bn, followed by Citi with $2.18bn and BNP Paribas with $1.51bn. All three describe supporting the net-zero transition and broader sustainability issues as key objectives.

Elena Flor, head of environmental, social and governance (ESG) and sustainability at Intesa Sanpaolo, says: “As a large banking group, we are aware that we have a significant impact on the social and environmental context in which we carry out our business. We act not only on the basis of profit, but with the objective of comprehensive long-term value creation for all our stakeholders, including our commitment to the reduction of climate change impact and social inequalities.”

She adds that “our approach to sustainable finance includes a strong focus on the circular economy and on green financing”, with the bank offering “dedicated products” in these areas.

Top 10 banks by total sustainable revenue

Disclosure limitations

Canada and the US sport the most banks in the ranking, at seven each — perhaps unsurprising for the latter given the size of its banking sector.

To be included in the ranking, banks must have signed up to the UN’s NZBA. This means they must have committed to achieving net-zero lending and investment portfolios by 2050. They must also set intermediary 2030 targets within 18 months of joining the alliance, and set further targets every five years from 2030, to hit net-zero by 2050.

In addition to being a NZBA signatory, institutions must also have committed to reporting under the Task Force on Climate-related Financial Disclosures (TCFD) framework on order to be included in the ranking. The TCFD is a group convened by the Financial Stability Board, which in 2017 issued recommendations for how organisations can develop and publish effective data about their climate-related risks and opportunities.

This means the institutions in the ranking are a select group, that have made significant commitments on achieving sustainable business models and climate reporting. According to Corporate Knights analysis, 91 banking institutions have signed up to both the NZBA and TCFD.

However, of these 91, Corporate Knights found that 31 did not report sufficient data about their sustainable revenue, or report their data in a format which enabled Corporate Knights to complete their analysis, so they were discluded from the inaugural ranking. Matthew Malinsky, research manager at Corporate Knights, says: “That’s not to say those banks are not actively investing in or lending to sustainable activities, but their levels of disclosure are such that we aren’t able to quantify it.”

On the flipside, Mr Malinsky observed that there were around 30 institutions which provided high levels of disclosure in relation to their sustainable revenue. For instance, multiple data points about their exposure via sustainable lending or levels of underwriting of sustainable capital raising.

He adds: “I think there is still significant room for improvement on disclosure. And when I say disclosure, it’s not simply stating in an ESG or responsible investing report that a certain amount is being committed in ESG financing over a given period. We’re looking for specific areas of activity that are broken out both by themes and asset classes.”

In particular, Mr Malinsky highlighted a dearth of granular data about banks’ sustainable investing activities — even in those cases where they did provide data on investment in ESG funds, there was typically little or no breakdown beyond that. This means that Corporate Knights was not able to assess the sustainable investment activities of almost all the banks in the ranking.

However, on the positive side, he says: “Something we found, that was a pleasant surprise, was the level of sustainable underwriting activity was nearly on par with loan book activity. The total amount of underwriting in 2021 that we found was just over $600bn. And the total outstanding sustainable loan book was around $680bn.

“There seems to be some traction growing in the green mortgage market. Seven of the banks that we were able to quantify lending figures for reported totals for green mortgage lending — we’re hoping to see this number continue to grow.”

Top ranking bank by country

Moving forward

All three of the leading performers in the ranking acknowledge the need to accelerate their activity and to do more.

Karoline Bakka Hjertø, head of sustainability at SpareBank1 Østlandet, says: “I think it is impossible to work within sustainability — in any industry — and be happy about the speed of activity. We all agree that change needs to happen faster and that, really, this work should have started decades ago. But at the same time, we must make sure we do things properly, to a high standard.”

This is a view echoed by Vancity’s Ms Bergeron, who also remarks on the importance of collaboration. She says: “We’re continuing to work on our ‘what’s next?’ — the new innovations that are going to help us to achieve the net-zero commitments that we have as Vancity. Crucially, we know that we can’t achieve those goals on our own.”

Although they are making a substantive impact via initiatives within their own communities, such as retrofitting grants and transition support for small businesses, she adds: “Due to our size, even if we did everything we could to advance the net-zero agenda, it wouldn’t fundamentally change the world. But what we can do is show others what is possible and hopefully spur them on to think creatively about solutions.”

Ivan Frishberg, chief sustainability officer at Amalgamated Bank, says he hopes to see continued growth in clean energy financing, alongside the end of financing for fossil fuels.

“Our first commitment in this space in 2016 was that we would not engage in fossil fuel finance, and since then we have been able to grow our cleaning financing activity on top of that,” he says. “The real test as to whether institutions will hit their climate financing targets is not just about the amount of capital they are directing towards clean activities, but also the transition away from financing for fossil fuels. I think for some institutions, those high-carbon activities have proven to be quite sticky on balance sheets.”

Methodology

The Sustainable Banking Revenues Ranking analyses the revenue sources of banking institutions that are signatories to the Net Zero Banking Alliance and, in addition, are committed to reporting under

the Task Force on Climate-Related Financial Disclosures framework. In particular, it examines the amount and percentage of their revenue which is obtained from sustainable sources. The institutions with the greatest percentage of sustainable revenue as a share of their overall revenue are ranked the highest. 

Sustainable economy research and media organisation Corporate Knights conducted the analysis and measured the revenues each institution earned from sustainable loans, sustainable investments and sustainable bond underwriting during 2021, based on activities defined as sustainable within the Corporate Knights Sustainable Economy Taxonomy.

Some 91 bank institutions in total were eligible for analysis. Of these, 31 did not report sufficient data or report their data in a format which enabled Corporate Knights to complete its analysis. Therefore, these banks have been excluded from the ranking. 

Data was obtained via public disclosures with some supplementary data provided by the Climate Bonds Initiative. 

All banking institutions that were assessed were contacted for verification of the data and given three weeks to respond and provide any data that may not have been captured through public disclosures.