The world’s largest banks are not disclosing enough data on their carbon footprint, an analysis from the Transition Pathway Initiative (TPI) has found.
While most banks are setting climate change goals, very few have specific policies set to meet those targets. Only six of the 26 banks analysed have disclosed commitments to end activities that finance new coal capacity, while only one bank has net zero emissions commitments that covers both on and off-balance sheet activities.
Meanwhile only five banks have revealed the results of their climate scenario analysis to shareholders, while none of the banks disclosed the share of total finance directed towards climate solutions.
The analysis was based on the initiative’s net-zero banking assessment framework and was used to assess the top banks in Europe, North America and Asia. The framework includes 10 assessment areas including net-zero commitments, target analysis, climate governance, just transition, emissions disclosure and performance, and more.
European and Japanese banks fared far better than other regions, with ING scoring above average in eight out of 10 areas. Meanwhile, banking giants JP Morgan and Morgan Stanley only scored above average in two areas.
There are still significant financing flows going towards fossil fuel projects, with very few exclusion polices among banks, the report found. Exclusion policies that do exist are not comprehensive enough and leave loopholes for banks to still continue supporting and getting revenue from fossil fuel assets.
“Financing conditions set by banks are a key lever for incentivising the low-carbon transition of their clients in high-emission sectors. However, in the case of misaligned activities such as thermal coal mining, it is crucial that banks formulate stricter policies to exclude any new financing to new fossil fuel assets. This would facilitate a full phase-out of fossil fuels to reach net-zero emissions worldwide, as recommended by the [International Energy Agency],” the report stated.
Still, the report found that overall there has been improvement on climate action compared to last year. Of the 26 banks reviewed, 20 have a net-zero commitment and 21 have set medium-term targets for their oil, gas and electric utilities lending portfolios.
The TPI recommends that banks move forward by expanding their emission reduction targets to include all financing activities, including climate-related risk analysis in annual reports, create comprehensive financing policies for high-emission sectors, and expanding their disclosure and governance structures to include climate action.
This page was last updated September 20, 2023
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