“Banking on a Low-Carbon Future: Finance in a Time of Climate Crisis” (http://news.bostoncommonasset.com/wp-content/uploads/2019/11/Banking-on-a-Low-Carbon-Future-2019-11.pdf) is Boston Common’s fifth annual study of how global banks are managing climate risks and opportunities. The report finds that the explosion of risk assessment tools and green banking industry initiatives in recent years has had little impact on commercial behavior including the expansion of fossil fuel financing. “We are now facing a climate crisis, and global emissions are not expected to peak by 2030. Time for incremental change is over. We need to see transformation in the banking sector”, the report states.
The report calls on companies to:
Transform corporate culture and mindsets
Adopt group-wide climate strategies overseen by the board, with robust implementation throughout the organization from the C-Suite down to front-line managers.
Change financing priorities and procedures
Adopt a clear strategy for decarbonizing balance sheets, including clear timelines for restrictions and phase-outs of financing for fossil fuels and deforestation
Measure, report, reward
Set explicit targets to increase the proportion of sustainable finance commitments relative to their overall financing activities, noting that 45% of banks have yet to set any such objectives
Engage and collaborate
Commit to making 2020 a “year of action” in alignment with the Paris Accord, focused on decarbonization goals and climate solutions.
Speak! Use the company’s public voice
Integrate public policy on climate into overarching climate strategy, engage trade associations on adopting progressive climate policies, and use the company’s public voice to promote progressive climate policy with governments and regulators.
Boston Common Asset Management calls for capital reallocation in support of new business models: “We commend the leaders in this space, but call for boards and managements to take on much more ambitious, decisive change. This is necessary to manage the significant, imminent risks of climate-related risks affecting all businesses and assets they finance, while also enabling and profiting from the significant opportunities in society’s transition to a low-carbon future.”