Banks begin to address climate change

“Europe’s largest banks are not doing enough to address the twin crises of climate change and nature loss” is the top line of a report published by UK NGO ShareAction this week. This message was widely echoed during COP15, the international biodiversity summit that came to a close earlier this week in Montreal, Canada.

While banks in Europe are generally making strides to integrate climate change into their governance processes, they are only just starting to identify risks, opportunities, impacts and dependencies related to biodiversity loss. Very few integrate biodiversity into key risk management processes, finds the report. 

Further, even on climate change, banks are not going far enough to make a real difference to global emissions, it adds. Fossil fuel policies generally remain incompatible with the 1.5°C pathway agreed under the Paris Agreement, net-zero targets are incomplete, and the true extent of the risks and impacts of a warming world are still not being disclosed, concludes ShareAction.

Doing the bare minimum

Two days after the report was published, HSBC, which ranked eighth out of the 25 banks analysed by ShareAction – based on their performance on key climate and biodiversity metrics – announced it would no longer finance new oil and gas fields.

This decision by the UK’s biggest high street bank “sets a new minimum level of ambition for all banks committed to net zero”, commented ShareAction’s Jeanne Martin in a press statement. While urging “major banks like Barclays and BNP Paribas to follow suit”, she added that HSBC also needed to come forward with further proposals. 

The announcement “only applies to asset financing and doesn’t deal with the much larger proportion of finance [HSBC] still provides to companies that have oil and gas expansion plans,” said Ms Martin.

“European banks are part of the front pack in terms of climate and general sustainability awareness in the financial world,” says Beate van Loo-Born, head of global business management at Six, a Swiss financial service company. She suggests, however, that this engagement is largely because EU regulation is forcing them to act rather than because of any real desire to engender change.

“European banks, and finance in general, need to engage in real climate finance,” says Ms van Loo-Born. “They need to move from a regulatory reporting and instrument classification focus to impact creation,” she insists, to ensure their actions reduce carbon dioxide emissions in the real world. Banks tend to stop at “it’s labelled green, therefore it’s good, rather than taking an interest in the reality of impact,” she comments.

Nature loss just as important

Yet simply focusing on climate change will not be enough to keep the global temperature rise below internationally agreed levels and to allow humans to continue to thrive and prosper. Stemming, and ultimately reversing, the frightening loss of biodiversity, is also vital. 

A recent report from the World Wildlife Fund revealed that nearly 70% of wildlife populations globally had disappeared since 1970. Attendees at COP15 made it clear nature loss was as much an economic issue as it was an environmental issue.

“Nature is a mainstream economic issue,” insisted Clare Shine, director and CEO of the Cambridge Institute for Sustainability Leadership, during a press conference in Montreal on Tuesday. “All economies depend on nature thriving.”

Mark Carney, the UN special envoy on climate and finance and co-chair of the Glasgow Financial Alliance for Net Zero, outlined the huge risks that business-as-usual poses for nature, people and the economy, insisting on the need for financial institutions to address climate change and biodiversity together.

“Amazon is listed as one of the most important companies, yet the Amazon forest appears on no ledger until it is stripped,” he said during the opening session of COP15’s Finance Day on December 14, to highlight how banks and private companies were still failing to understand the value of nature for their very existence.

Banks are becoming more aware that biodiversity protection “must form a part of their strategy”, says Hannah Greep from Netherlands NGO BankTrack, “however, this is not being backed up by concrete actions”. To ensure real action, voluntary self-reporting by businesses and financial institutions needs to be replaced by “stringent, concrete regulations to curb corporate and financial impunity, and address the root drivers of biodiversity loss”, she says.

Emmanuel Faber, chair of the International Sustainability Standards Board, a not-for-profit initiative created in 2021 to set international rules for climate-related disclosures such as carbon emissions, said in Montreal that his organisation would soon look at similar rules for biodiversity. These standards would build on the work of existing initiatives such as the Taskforce for Nature-related Financial Disclosures, he said.

COP15 negotiators agreed on December 19 a new Global Biodiversity Framework that aims to halt the destruction of nature, targeting 30% of the world’s land, inland waters, coastal areas and oceans to come under conservation in the next eight years.