Banks across the globe have loudly proclaimed their commitment to ESG principles and sustainable finance over the past year. Now a handful have joined a new alliance to accelerate the shift to a low-carbon global economy.

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Unsurprisingly, this year’s Earth Day (April 22) saw a lot of action around climate change, environment, social and governance (ESG) and sustainability, especially as the US has re-joined the Paris climate accord. At President Joe Biden’s Leaders Summit on Climate, countries lined up to announce their reinvigorated commitments on cutting greenhouse gas (GHG) emissions. The US pledged to reduce emissions by 50-52% below 2005 levels by 2030, Japan vowed to cut emissions by 46% from 2013 and the UK increased its existing 68% by 2030 reduction target to 78% by 2035.

Ahead of Earth Day, former Bank of England governor and current UN special envoy on climate action and finance, Mark Carney, kicked off the Net Zero Banking Alliance (NZBA) with 43 banks holding $28.5tn in assets, under the auspices of the UN Environment Programme and Sustainable Markets Initiative Financial Services Taskforce. The initial signatories to the initiative include a range of banks from 23 countries, including big names from the Americas and Europe, such as Bank of America, Bancolombia and HSBC, with a handful of African and Asian banks. Conspicuous by their absence were the big Chinese banks.

NZBA forms part of the Glasgow Financial Alliance for Net Zero (GFANZ), launched ahead of the COP26 meeting in November. The umbrella group also includes the Net Zero Asset Owner Alliance with 37 asset owners, including Aviva, CalPERS and Zurich; the Net Zero Asset Managers Initiative; the Paris Aligned Investor Initiative; and the Net Zero Insurance Alliance with seven insurers and reinsurers. All members have committed to aligning their lending and investment portfolios with net zero emissions by 2050, with the first step being to set targets for cutting the carbon content of their assets by 2030.

Banks have got to step up and walk the walk by setting ambitious targets and sticking to them

While this is arguably a significant initiative, many will point to similar alliances launched previously, such as Network for Greening the Financial System and the UN’s Collective Commitment to Climate Action (forerunner to NZBA). Can the NZBA initiative succeed in moving the needle in terms of action? Clearly talking is no longer enough; banks have got to step up and walk the walk by setting ambitious targets and sticking to them.

As a first step, NZBA member banks will focus on the most GHG-intensive sectors within their portfolios to hit their 2030 targets. Another round of sector-level targets will be set within 36 months of joining, to ensure banks are helping their clients decarbonise. Within a year, members will also have to publish annual emissions reports in line with best practice.

Reporting can be a tricky area, as there are multiple reporting frameworks in use today. In this month’s Sustainable Views newsletter, editor Silvia Pavoni interviews Janine Guillot, chief executive of Sustainability Accounting Standards Board (SASB), which is one of the key ESG reporting frameworks. Ms Guillot explains how SASB is working with other organisations to harmonise and improve reporting.

April’s newsletter also includes an op-ed penned by Allan Baker, global head of advisory and project finance of the energy group, Société Générale, on floating solar systems and how they’re becoming a serious contributor to the green transition. And it looks at the numbers behind the further rise of sustainable debt — as of the end of the first quarter of 2021, outstanding debt and loans stand at $2.27tn, according to a report by the Institute of International Finance.

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Joy Macknight is editor of The Banker. Follow her on Twitter @joymacknight

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