Committed on paper to reducing their carbon footprint, large banks persist in financing activities that emit high levels of greenhouse gases, according to a report published Tuesday by the Transition Pathway Initiative (TPI), a research center specializing in low-cost investments. -carbon.
The TPI, based at the prestigious London School of Economics, surveyed 26 transnational banking establishments. Among them, 22 are ready to finance new activities linked to coal, and 24 to the exploitation of new oil and gas fields. This direction of investments poses significant challenges for the global energy transition.
Impact of Bank Financing on the Climate
By facilitating the circulation of capital towards high-emitting sectors, banks contribute to the worsening of climate risks. Simon Dietz, research director at TPI, emphasizes that “while some progress has been made since our first assessments in 2022, banks are not acting quickly enough to achieve global climate goals.” It adds that “without stronger action, the banking sector exposes the global economy to increased regulatory, commercial and physical risks linked to climate change.”
The report examines a total of 38 banks, including ten US regional banks as well as French banks Crédit Agricole, Société Générale and BNP Paribas. It reveals that most of these institutions are not contributing enough to enabling the world to meet the temperature goals of the Paris Agreement.
Emissions Reduction Plans: An Insufficient Effort
Only 19% of the trajectories presented by banks for their various sectors of activity include plans to reduce their carbon footprint by 2035, in line with the requirements to limit warming to 2°C compared to the pre-industrial era. . This figure drops to 3% when considering the stricter limit of 1.5°C.
TPI analysis shows that European and Japanese banks have set more sectoral decarbonization targets than their North American counterparts. In contrast, the Chinese banks studied have not yet established sectoral decarbonization targets, which could hamper overall efforts to reduce emissions.
Call for Stronger Banking Action
The report’s authors call for more systematic integration of climate issues into banks’ operations. “Promising carbon neutrality has become commonplace, but these commitments remain limited in their scope due to the exclusion of important sectors of activity,” they emphasize. They estimate that only 22% of banks’ revenues are covered by climate commitments, which is insufficient for a significant impact.
Economic and Regulatory Consequences
Banks’ lack of commitment to reducing financing to polluting industries exposes these institutions to increased risks. On a regulatory level, banks could face additional sanctions or constraints aimed at limiting their contribution to greenhouse gas emissions. Additionally, on a commercial level, investors and customers could turn away from banks that do not meet expected environmental standards.
Conclusion on Banking Commitments
The TPI report highlights the urgent need for major banks to strengthen their commitments to reducing carbon emissions. Without concerted and ambitious action, the banking sector risks not only compromising global climate goals but also exposing itself to major financial and reputational risks.
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