Major financial institutions lack "robust commitments" to restrict or end the financing of fossil fuels, data from non-profit organisation World Benchmarking Alliance (WBA) show today.
WBA assessed 400 financial institutions, including banks, insurers, asset managers and asset owners. Of these, just two — Dutch bank ING and Swiss bank Zurcher Kantonalbank — have commitments to both phase out existing exposure to fossil fuels and stop new financing flows, WBA found. Of the institutions it evaluated, 15pc reported on financed fossil fuel activity, WBA added. Financial institutions' reporting on their finance for "low-carbon solutions" was higher, at 26pc, WBA found.
Moving away from financing fossil fuels is "a step companies must take to demonstrate credible transition strategies and address escalating energy risks", WBA said. Fossil fuel combustion accounts for around 70pc of global greenhouse gas emissions.
Of the financial institutions it assessed, more than a third "have initial signs of transition planning towards a low-carbon economy", WBA said. But it pointed to "major gaps" in the plans' credibility.
For WBA to deem the transition plans as credible, they must have "sectoral targets for financing low-carbon solutions" for 2030, in line with a 1.5°C pathway. Banks lead the way, according to WBA data, with a "time-bound" and 1.5°C-aligned financing target present in a fifth of their transition plans. But such targets are included in far fewer plans from insurers, pension funds and asset managers, at 10pc, 7pc and just under 3pc, respectively, WBA found.
The Paris climate agreement seeks to limit the global rise in temperature to "well below" 2°C above pre-industrial levels, and pursues a 1.5°C threshold.
Some financial institutions have rolled back on climate-related pledges or action in recent months, most notably in the US. UK bank NatWest has removed some prohibitions on financing oil and gas producers, while UK-based HSBC and Spain's Santander have "weakened commitments to shift capital away from high-polluting clients", non-governmental organisation ShareAction said.
Net zero investor initiative Net Zero Asset Managers (NZAM) relaunched in late February with weakened climate targets. And members of the equivalent initiative for banks, NZBA, voted in October to wrap up the alliance. The group's guidance for banks on setting climate targets remains available.
