Majority of World's Largest Private Banks Don't Have Sustainable Finance Commitment

A majority of the world's largest private-sector banks have not made sustainable investment commitments to finance a low-carbon future.

As global populations express concern about climate change, banks are ramping up pledges commitments to sustainable projects. Just last month, at the United Nations Climate Summit, more than 50 financial institutions with $2.9 trillion worth of assets announced that they would assess and share the emissions impact of their transactions.

Even so, bank action on sustainable commitments lags far behind what is needed to avoid climate catastrophe, the World Resources Institute said in findings released Thursday.

Of the 50 largest private-sector banks in the world, only 24 have made sustainable finance commitments. Some banks -- led by the Bank of Montreal, which in June pledged $400 billion Canadian dollars ($300.24 billion USD) -- have pledged hundreds of billions of dollars in sustainable finance commitments.

But these funds were often spread over a series of years, meaning that the annual contributions from the banks were far lower.

U.S. giants Citigroup and Goldman Sachs have pledged $100 billion and $150 billion respectively, but their annual contributions amounted to $10 billion and $10.71 billion per year. These annual amounts were far below the total each bank gave in fossil fuel financing in 2018, according to a report from the Rainforest Action Network. Citi provided over $43.2 billion in fossil fuel financing last year, while Bank of America provided over $33.7 billion.

(The Canadian Imperial Bank of Commerce, which last week became the 24th of the measured banks to announce sustainability targets, is not included in calculations used in the report and noted here.)

The disparity in funding for low-carbon projects and continued investment in fossil fuels has led to harsh evaluations from environmental groups, which have been critical of banks' progress in addressing climate change.

"Since the Paris Agreement, banks have poured USD 1.9 trillion into fossil fuels, when we know that no new coal, oil, or gas production actually fits within the Paris climate goals," Brett Fleishman, Global Finance Campaign Director at environmental group 350.Org, told Newsweek. "For banks to truly align themselves with helping rather than hindering climate action the number one priority test is to stop pouring fuel on the fire. Many banks have signed up to 'principles' or to 'stricter policies' but very few have actually walked the talk and turned off the money tap to coal, oil and gas," he added, pointing to U.S. and Japanese banks as being some of the worst offenders.

The WRI analysis notes that many of the banks that pledged sustainable commitments have unclear accountability methods. Although 70 percent of banks that offered sustainable commitment targets included a plan for reporting progress toward sustainability goals, only 43 percent entirely explained their method of accounting their commitments. Terms for defining sustainability criteria also vary by bank, and 30 percent of banks that have made pledges have not included specific timelines. Because of the variable definitions and financial services deployed, comparisons based solely on the amount pledged are unreliable and don't actually reflect the level of commitment by each financial institution.

WRI Associate Ariel Pinchot and WRI Senior Associate Giulia Christianson Senior Associate acknowledged these weaknesses in bank pledges, writing in a blog post that "banks need to put out more ambitious green targets, backed by more robust accounting methodologies." They also wrote that banks needed to issue "commitments that are clear, transparent, timebound, and that embrace sustainability as core to business."

Even if the existing commitments need to expand, the WRI researchers regarded current pledges as a positive step.

"We were encouraged that banks are coming forward with these statements," Christianson told Newsweek. "Having these commitments I think [does] serve as a signal to get all of those banks [to] look at these opportunities and finance these solutions."

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Demonstrators hold up signs at a rally in support of the climate strike during the last day of the Global Action Week for Climate on September 27, in Lisbon, Portugal. Pedro Gomes/Getty Images