Banks and financial institutions, with nearly $6 trillion in market capitalization, are a key player in combating the impacts of climate change and supporting the investments necessary to move the world economy on a pathway to reduced greenhouse gas emissions.
The report found that a growing number of European, U.S. banks and Japanese banks are responding to the risks and opportunities presented by climate change, primarily by setting internal greenhouse gas (GHG) reduction targets, boosting climate-related equity research and elevating lending and financing for clean energy projects. But many others are still not addressing climate change and only a handful of the 40 banks have begun integrating climate risks into their core business of lending by pricing carbon into their finance decisions or setting targets to reduce GHG emissions in their lending portfolios.
The shortcomings were evident in the report’s final scores. Using a 1- to 100-point scoring system, the two highest scoring banks were European-based HSBC Holdings and ABN AMRO with 70 points and 66 points, respectively. More than half of the 40 banks scored under 50 points, with a median score of 42 points.
“More banks realize that climate change is a big business issue, but their responses so far are the tip of the iceberg of what is needed to tackle this colossal global challenge,” said Mindy S. Lubber, president of Ceres, which published the report, Corporate Governance and Climate Change: The Banking Sector. “As a key provider of capital and financing worldwide, banks must do more to move the economy away from fossil fuels and high-carbon investments that are exacerbating climate change.”
The report employs a “Climate Change Governance Checklist” to evaluate how 16 U.S. and 24 non-U.S. banks are addressing climate change through board of director oversight, management performance, public disclosure, GHG emissions accounting and strategic planning. The report took six months to complete and uses data from securities filings, company reports, company websites, third-party questionnaires and direct company communications.
The report ranked 16 U.S., 15 European, five Asian, three Canadian and one Brazilian bank. The 40 companies include several different classes of financial services firms, including diversified banks, investment banks and asset managers. The final scores are weighted to reflect the fact that some of the banks – specifically, asset mangers and investment banks – are not engaged in the full spectrum of product and service offerings assessed by the Climate Change Governance Checklist.