Global banks continue climate retreat, study warns

Key points

• Global banks are weakening their climate commitments, according to the TPI Centre’s annual State of the Banking Transition 2026 report, with net zero commitments showing the biggest falls in scores and some banks abandoning targets and policies altogether.
• RBC, Scotiabank and Wells Fargo were flagged for withdrawing their sectoral targets, and sectoral target-setting across the industry has declined sharply since peaking in 2022 and 2023.
• European banks scored highest, reflecting the EU’s mandatory disclosure rules, while Chinese and American banks scored lowest, and Chinese banks focus mostly on financing climate solutions.

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Global banks are retreating from climate action, according to an annual study of the world’s largest banks measured by market capitalisation and total assets.

The State of the Banking Transition 2026 report, published by the TPI Global Climate Transition Centre at the London School of Economics, found that banks are reducing their low-carbon ambition, with some even cancelling their commitments, targets and policies altogether.

Last year’s report had already indicated that banks had started weakening their climate policies.

The annual study scores banks’ climate ambition based on how they manage the low-carbon transition overall, as well as which sectors and business activities their sectoral emissions reduction targets cover.

The biggest falls in scores were in net zero commitments, the report found.

Meanwhile, Canadian banks RBC and Scotiabank and US bank Wells Fargo were flagged for having withdrawn their sectoral targets. Green Central Banking contacted the banks but they did not respond to requests for comment in time for publication. 

The TPI report states that sectoral target-setting has declined sharply since peaking in 2022 and 2023.

“While most banks have targets for autos, electricity utilities, oil and gas and steel, few cover chemicals, diversified mining, food and metallurgical coal,” it adds. 

The study also highlights jurisdictional differences, with the highest-scoring banks all located in Europe. This reflects regulatory pressure, with the EU’s mandatory disclosure requirements requiring all EU banks to report financed emissions and financial exposure to high-emission sectors.

Meanwhile, the lowest-scoring banks are Chinese or American, with Japanese banks performing better overall than their Chinese counterparts.

The report also emphasises that Chinese banks focus mostly on financing climate solutions, reflecting state-backed support for this area of climate action.

Financial statements

 

A new addition to this year’s report is the assessment of banks’ recognition of climate-related risks in financial statements. So far, this seems to be a European trend, with seven European banks disclosing the accounting assumptions and judgments they use to estimate these risks in their financial statements.

“What matters is the transparency of whether a risk is deemed material or not, and on what assumptions,” said Dorota Wojnar, head of the ESG risks unit at the European Banking Authority. “That transparency allows supervisors and stakeholders to understand whether the conclusion is well-founded,” she added.

Most banks that embed climate-related risks in their financial statements do so through expected credit loss.

“Because expected credit loss is inherently forward-looking and applies to one of banks’ largest asset classes, it is the primary point at which climate-related risks enter the financial statements,” the report states.

It adds that more advanced banks supplement macroeconomic scenarios with granular sectoral and client-specific information. For instance, the report points out that flood risk data may be used to adjust the collateral value of mortgage portfolios. 

“Most banks now recognise climate risk as a key risk, yet many don’t disclose how they account for it, leaving a gap in what investors and policymakers can assess about banks’ exposure,” said Algirdas Brochard, policy fellow and research project manager at the TPI Centre. 

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