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Are Banks prepared for Climate Change?

Are Banks prepared for Climate Change?

Upload time:2021 - Nov
  • Boston Common, 2015. Are Banks Prepared for Climate Change - Impact ReportDownload

In October 2015, Boston Common Asset Management issued its latest impact report: Are Banks prepared for Climate Change? SynTao Green Finance provided support in Chinese banks' data collection as well as research on local regulatory context on green banking.

 In the past year, Boston Common has conducted a research project to assess the world's largest banks on their current practices and long-term approaches to climate-related risk. One important objective was to advance the dialogue with banks regarding gaps in meaningful information about climate-related risk management, and opportunities for new products in support of sustainable growth. The project was supported by 80 institutional Investors with almost US$500 billion in assets.

 The project assessed 61 global banks including Barclays PLC, Citigroup Inc, UBS AG, Deutsche Bank AG, HSBC Holdings plc, Morgan Stanley, etc. Agricultural Bank of China, Bank of China, Bank of Communications, China CITIC Bank, China Construction Bank, China Industrial Bank, China Merchants Bank, and Industrial and Commercial Bank of China are the eight Chinese banks included in the research.

 Of the three climate-related areas Boston Common assessed, namely risk management, business strategy, and capitalizing on opportunity, banks performed best on the last category. A majority of global banks in the survey reported progress in identifying and offering products and services associated with climate change, ranging across areas such as renewable energy, energy efficiency, mitigation, and adaptive response. As for the other two aspects, banks worldwide are clearly making efforts to rebalance their portfolios to reduce exposure to energy intensive sectors, such as coal, in favor of energy efficiency or renewable energy; however, banks across all regions failed to conduct comprehensive, climate related stress tests or adjust loan pricing in view of climate risk or to reflect such risk in executive compensation and board oversight procedures.

 In recent years, the concept of green finance has been highlighted in China, and a series of green credit policies have been issued. In view of this point, Chinese banks performed particularly well in the ranking in the research.