Major banks ‘far off track’ to hit climate targets: WRI

Major banks are "far off track" to meet their climate pledges, and many of their commitments are not ambitious enough, non-profit the World Resources Institute (WRI) has found.

WRI assessed 25 banks in 10 countries, including the four biggest in the US — JP Morgan Chase, Wells Fargo, Citibank and Bank of America — and the world's biggest bank in terms of assets, the Industrial Commercial Bank of China. WRI analysed the institutions' net zero commitments across transparency and ambition, implementation, credibility and nature and equity.

Of the 25 banks analysed, just four have a "long-term commitment to phase out or [phase] down oil and gas finance", WRI found. Most of the banks — 16 of the 25 — have committed to phase out coal financing by 2040 or earlier.

Although most banks reported "green" financing — albeit using different definitions — this was often significantly lower than financing for fossil fuels, it added. If the world is to meet climate targets in line with the Paris Agreement, investment in "clean energy" must by 2030 outpace fossil fuel investments by 10:1, according to the IEA. But the banks assessed "fell far short of this mark", averaging a ratio of 1.3:1, WRI said.

The WRI pointed to "significant blind spots" in banks' plans. The majority of the institutions it assessed do not have a commitment to reduce deforestation, while "high emitting sectors like shipping and real estate are barely covered", it found.

Overall, banks' commitments are varied and standardisation is lacking, making comparison difficult, WRI noted. A UN-appointed group in November 2022 set out guidelines to "bring integrity to net zero commitments", while the UK in October last year issued a "gold standard" climate transition plan framework for companies and financial institutions to follow.

The focus on private sector finance is intensifying, ahead of the UN Cop 29 summit, set for November in Baku, Azerbaijan. Finance will be the key topic at Cop 29, including discussions around funds to tackle climate change in developing countries.

Several jurisdictions, including the EU, are clear that public climate finance will not be enough to address climate change, and that private sector finance must be mobilised.

By Georgia Gratton