Despite pressure from activists, investors and governments, the majority of world's 50 largest banks have not made sustainable finance commitments to respond to the risks of climate change and continue to finance fossil fuels, according to new findings by the World Resources Institute released on Thursday.
Washington-based WRI unveiled its new Green Target Tool, which analyzes and compares the world's 50 largest private banks' public commitments to address climate and found that as of July, only 23 of the world's 50 largest private banks made commitments to finance projects for sustainable energy.
Among those 23 banks with commitments, the average annual level of fossil fuel finance between 2016 and 2018 is nearly twice the annualized amount of sustainable finance commitments. Only seven banks had annualized sustainable finance targets greater than the amount of finance they provide for fossil fuel-related transactions.
"If banks are serious about sustainability and stepping up to address the climate change challenge, we would expect to see a shift in how their sustainable finance commitments compare with their fossil fuel finance," said Giulia Christianson, head of sustainable investing at WRI.
"For now, most banks' annualized commitments are considerably less than what they provide to fossil fuels on an annual basis."
Banks have been making sustainable finance commitments for more than a decade but the number of announcements increased in the lead up to the Paris Climate Change summit in 2015 and continues to rise steadily.
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.
Less than less half of the banks with commitments have a common, transparent accounting methodology to report on their progress, Christianson said.
In the lead up to the United Nations Climate Action Summit last week, a number of banks including ABN Amro (ABNd.AS) and Amalgamated Bank (AMAL.O) announced they will adopt measures to improve the transparency of their investments to measure their responses to climate change.
Another group of over 130 banks including Deutsche Bank (DBKGn.DE), Citigroup (C.N) and Barclays announced they would adopt United Nations-backed principles for responsible banking aimed at pushing companies and governments to act quickly to avert catastrophic global warming.
"We think there is a need for banks to increase their ambition and be a part of the climate change solution and make sure they are designing bold and transparent commitments," Christianson said.