Big banks not saying how they plan to combat climate change through financing

Researchers have said that big banks are rather silent on how they intend to do their bit in tackling climate change through their financing policies.

The top 10 banks – ranked as the largest funders of fossil fuel organizations – are talking more about climate change in general. However, in an analysis of annual reports, these banks were found to be vague when it comes to initiatives to counter it.

In 2020 alone, $425.92bn was spent financing fossil fuels by this group – which includes banks from the US, such as JP Morgan Chase; the UK, Barclays; Canada, Toronto Dominion Bank; and Japan, Mitsubishi UFJ Financial Group.

Published today in the peer-reviewed journal Climate Policy, the findings of this new study include a plea from the experts to change the way banks support the fossil fuel industry. The team, based at the University of Gothenburg, also set a three-point list of recommendations.

The team of researchers expects “public pressure” to likely affect the banks’ priorities and strategies in relation to climate change.

The team’s recommendations for policy changes include:

  • Climate-related financial disclosures should target banks’ climate impact in relation to their client financing; in a clear and contextualized manner, so it is accountable.
  • Effective policies to explicitly consider how banks should measure and reduce climate impacts in a way that is comparable – aligned with the Paris Agreement – and in relation to credit financing operations to clients.
  • Legislation mandating human rights and environmental due diligence implemented with explicit considerations in relation to climate change.

Their paper analyses the annual reports from 2015 to 2019 for the world’s 10 largest banks, based on their level of financing fossil fuels following from the 2020 Banking on Climate Change report.

The biggest financier is JP Morgan Chase with $64.93bn, followed by Citigroup with $52.41bn. Scotiabank round-up the top 10 with $26.04bn spent.

The experts used an auto-coded word search to identify and highlight climate change-related quotes and then reviewed each section in detail, manually identifying areas for further analysis.

The emerging pattern is an increasing trend for annual reports to focus on elements of climate change, varying from bank to bank. Crucially, however, despite the increase the study finds “little discussion of how climate change might affect the bank in relation to its societal impact”.

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