We’re making progress on understanding our contribution to climate goals, but cannot go it alone

As we head into the UN Secretary General’s upcoming climate summit, most of us understand climate change to be one of the most frightening events facing us right now. While governments, researchers, businesses and individuals are now pulling together to face this threat, we are already seeing the increasing occurrence of extreme weather patterns and other symptoms of climate change.

Banks – including ourselves – often finance activities that contribute to climate change because they meet our risk criteria, whilst supporting economic activity, including wealth and job creation. This is important in those markets that are desperately trying to improve living standards.

This cannot continue unchecked. The stakes are too high. The problem is that making decisions about how and where to allocate funding is driven by data, but data on emissions and the consequential climate impact is often unreliable, inconsistent and not easy to replicate.

To address this, we joined forces with 2 Degrees Investing Initiative (2DII), a climate think tank to pilot a software tool which provides emissions assessments to look at parts of our own portfolio. 

Our pilot has shown a lot of promise. We recently made the finding public via our Emissions white paper to share our experiences – and learnings – as widely as possible and invite participation from others. With the help of other banks and stakeholders, we can make more headway and find answers to the challenges we have identified: getting the right data, validating it and scaling it up to cover 100% of our portfolio.

We believe this is critical to enable us to help our clients, communities, stakeholders and ourselves achieve the climate goals, as set out in the Paris Agreement, to keep global warming below 2 degrees Celsius.

Clearly, we cannot make a substantive difference alone. We’re collaborating with four other banks – BBVA, BNP Paribas, Société Générale and ING – through the Katowice Commitment to further develop the methodologies and tools the banking sector needs to assess our own contribution to climate goals.

Measuring emissions is complex and requires action from multiple parties. We are making some progress, but with more collaborators, we can do more.

So, what am I asking for?

While the finance industry is stepping up to meet this challenge, the risk of banks, regulators and investors creating disparate and separate tools and metrics on the environmental impacts of financing will cause delay and confusion. The finance industry needs to join together to create a common set of standards, following the recommendations of the Task Force on Climate related disclosures. We are happy to work with any partners – NGOs, regulators, other financial institutions – to pull these standards together. 

Our clients are key to the transition to a low-carbon economy. Therefore, it is imperative that we – and the banking industry as a whole – continue to increase awareness in order to help our clients identify, assess and mitigate risks related to climate change.

There are great opportunities to support activities which reduce emissions, such as replacing plant and equipment with more energy-efficient versions or supporting lower-carbon energy sources. As we set standards, we should think about how those standards incentivise such choices for lenders.

The stakes cannot be overstated. To ensure that the flow of capital reaches the places where it is needed most to achieve climate goals, the world must work together and fast. ‘Business-as-usual’ as we know it is no longer acceptable; let’s all come together to help ensure the sustainability of our planet.