$47 Trillion-Worth of Banks Adopt UN-Backed Climate Targets
Banks from around the world with combined assets of $47 trillion have adopted a set of ‘responsible banking’ principles that were designed to implement environmental management strategies into the globe’s finance sector.
The banks account for one-third of the world’s finance sector, illustrating a shift in the paradigm of world finance and a move toward environmental management and away from fossil fuels.
The news comes courtesy of a report from Reuters, and includes some of the world’s largest financial institutions like Deutsche Bank, Citigroup, Barclays as well as 130 others joining “the new framework on the eve of a United Nations summit in New York aimed at pushing companies and governments to act quickly to avert catastrophic global warming.”
“These principles mean banks have to consider the impact of their loans on society- not just on their portfolio” -Simone Dettling.
“These principles mean banks have to consider the impact of their loans on society- not just on their portfolio,” Simone Dettling, a member of the United Nations Environment Finance Initiative Reuters.
“They need to demonstrate that they are making progress - and progress within a given timeline,” she added. “Ultimately, banks that are not in line with their commitments and do not make progress can be stripped of their signatory status.”
The report says that the move is reflective of changing consumer demands from their banks, adding that “under pressure from investors, regulators and climate activists, some big banks have acknowledged the role lenders will need to play in a rapid transition to a low-carbon economy.”
The ability for enterprises to raise capital for projects like oil, gas and coal exploration is set to come under a particularly stringent set of circumstances, shaped by the United Nations principles.
Those principles require financial institutions to:
Align their strategies with the 2015 Paris Agreement to curb global warming and U.N.-backed targets to fight poverty called the Sustainable Development Goals
Set targets to increase ‘positive impacts’ and reduce ‘negative impacts’ on people and the environment.
Work with clients and customers to encourage sustainable practices
Be transparent and accountable about their progress
Reuters says that “critics argue that banks should go much further by explicitly committing to phasing out financing for fossil fuel projects and agribusiness that drive deforestation in the Amazon, Southeast Asia and other regions.”
However, backers of the project say “the norms will encourage banks to pivot their loan portfolios away from carbon-intensive assets and redirect capital to greener industries.”