Banks get set to shine a light on their dark and bright places
Willow Aliento | 25 July 2017
ANZ and NAB are among 11 global banks that have committed to better understanding and disclosing climate-related risks and opportunities of their investment portfolios.
What’s in play is disclosure on more than $8.5 trillion in total bank investments in fossil fuel companies, renewable energy businesses and transportation companies.
Other banks working in partnership with the UN Environment Finance Initiative on related research include Barclays, Bradesco, Citi, Itaú, Royal Bank of Canada, Santander, Standard Chartered, TD Bank Group and UBS
The goal is to develop a set of analytical tools and indicators that can be used to shine a light for investors, insurers and other stakeholders
The move follows the publication of the final recommendations by the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures.
The task force was chaired by former New York mayor Michael Bloomberg, and its job was to develop voluntary, consistent climate-related financial risk disclosures for use by companies, investors, lenders and insurers.
Its final recommendations were presented to the G20 at its meeting earlier this month.
“The message from financial heavyweights is clear – climate change poses a real and serious threat to our economy,” said head of UN Environment, Erik Solheim.
“At the same time, there are enormous business opportunities in taking climate action. Transparency on how financial institutions mitigate the risks and seize the opportunities of a two degrees pathway is crucial to move international markets towards actively supporting a low-carbon and climate-resilient future.”
The UNEP wants to make public the results of the collaboration between the big 11 and the UNEPFI to encourage other banks to follow suit.
“After the G20, the issue now is about implementation: how can the finance industry put the framework into practice and deliver disclosure that is meaningful?” Christian Thimann, co-chair of UNEP FI and group head of strategy, sustainability and public affairs at AXA Group said.
“Sustainable finance is about two imperatives: improving the contribution of finance to sustainable, low-carbon and inclusive growth, and ensuring financial stability in light of environmental risks such as climate change.”
David Gall, chief group risk officer, National Australia Bank, said the bank recognises the growing demand for information that will enable investors, shareholders and customers make informed decisions on carbon opportunities and risks.
“We are committed to making sure we have reliable and standardised information to guide our reporting – we made a commitment to carbon risk disclosure in 2015 and our work with the UN Environment is another example of this commitment,” Mr Gall said.
One of the UNEP researchers working on the transparency plan, Simone Dettling, said in an interview with the Thompson Reuters Foundation that the disclosure could happen within the next year.
Among the data that is expected to be disclosed are bank investments in fossil fuel firms, renewable energy businesses and transportation companies, Ms Dettling said.
“The goal is to shift lending away from carbon intensive sectors that are becoming risky towards green technologies that are becoming more attractive,” she said.
Chief executive of ANZ Shayne Elliott, said companies must also improve the reporting on their management of carbon risks and opportunities to enable banks to make more informed decisions.
“We are doing our part by being an earlier adopter of the FSB Taskforce recommendations, joining this initiative and thus signalling we will be seeking greater disclosure from our customers about their climate related risks and opportunities.”
- Read the taskforce’s final recommendations here