85% of banks are still open to financing new coal, according to analysis by the TPI Centre

 

The TPI Centre, based at the London School of Economics and Political Science, assessed the climate ambitions of 26 major international banks, ten US super-regional banks, and two custodian banks for the State of Transition in the Banking Sector report. Despite banks setting targets to tackle climate change, there remains a huge gap with the policies they are implementing to reach their goals. The banks are still in the early stages of the low-carbon transition, and the current ambition and scope of their actions remain insufficient to meet climate goals. 

 

Overall, the report highlights a “stark reality” with overall performance from banks considered to be “weak.” The authors highlight that “setting net-zero commitments has become common practice, but these commitments remain limited in scope due to the exclusion of material business segments, particularly capital market activities.” The authors estimate that banks’ targets cover less than 22% of their total revenues.  

 

While most banks state that climate risks could have a material impact on their business, very few banks integrate climate risk considerations into their financial statements. Banks are also still “failing to disclose the share of climate finance in relation to the bank's total financing.”  

 

For the report, the TPI Centre used their Net Zero Banking Assessment Framework (NZBAF), developed in consultation with investor networks, Institutional Investor Group on Climate Change (IIGCC) and Ceres. Based on the sectors and business activities for which banks have set decarbonisation targets, the authors looked at banks’ Carbon Performance. They evaluated banks’ alignment with sectoral decarbonisation benchmarks (1.5°C, below 2°C, and National/International Pledges) over different time periods. 

 

The authors found that banks remain largely not consistent with the Paris Agreement, with only 19% of banks’ sectoral pathways being aligned with temperature goals of 1.5°C or below 2°C in the medium term (2028-35). They also lack short- and long-term targets to map a clear pathway to net zero by 2050. 

 

The TPI Centre’s analysis concludes that “European and Japanese banks have set more sectoral decarbonisation targets than their North American peers. Chinese banks have not yet set any sectoral decarbonisation targets.” The report also points out that “Of the banks we assess, Barclays, BNP Paribas, Groupe Crédit Agricole, HSBC, ING Bank and JP Morgan Chase have set the most targets: BNP Paribas covers nine of the 14 high-emission sectors with at least one target, while the others cover eight sectors.” However, there are still important differences between banks.  

 

ING, Deutsche Bank and JP Morgan Chase have the highest number of targets aligned with temperature goals of 1.5°C and below 2°C in the medium term (by 2035), setting three each. All three banks’ targets for below 2°C cover the electricity utilities sector. 

 

The TPI Centre also analysed US super regional banks, finding that only one bank is committed to reaching net zero financed emissions by 2050. They also discovered that none of the US super regional banks have set sectoral decarbonisation targets, and only 50% commit to scaling up climate finance with specific targets and milestones. The analysis found that only Fifth Third, Huntington Bancshares, and PNC disclose absolute financed emissions and only Truist discloses its exposure to all material high-emission sectors.  

 

Simon Dietz, Research Director at the TPI Centre and Professor of Environmental Policy, Department of Geography, LSE, said:  

“While some progress has been made since our initial assessments in 2022, banks are not moving fast enough to meet global climate goals.  

 

“Without stronger action, the banking sector exposes itself — and by extension, the global economy — to greater regulatory, market, and physical risks associated with climate change.” 

  

Blair Bateson, Director of Financial Services for Ceres’ Company Network, said:
"Having a comprehensive and independent benchmark of banks' climate progress is vital in moving the sector forward. Ceres looks forward to working with all the North American banks in the benchmark to help them catch up to global leaders."

 

Lucia Graham-Wood, Senior Engagement Specialist, Banks, IIGCC, said:  

“The TPI Centre’s independent analysis will provide useful insights that will help inform investors' engagement with banks. We look forward to continuing to support members of the IIGCC’s Banks Engagement and Research Initiative on their ongoing climate-related engagements with banks in Asia, Canada and Europe.“ 

 

 

ENDS  

 

Notes to editors  

 

 

*This figure is subject to market-price and foreign-exchange fluctuations and, as the sum of self-reported data by TPI supporters, may double-count some assets.