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Banking in the low carbon economy

On 30 January 2020 the Banking Environment Initiative launched a new report, “Bank 2030”. The study outlines the role of the banking sector in tackling climate change and details how individual banks can accelerate the transition to a low carbon economy. 

 

Context


Moving to a sustainable economy is the challenge of our time. Ever-increasing greenhouse gas (GHG) emissions are warming the planet, changing the climate and threatening human life.

We are already at 1°C of warming above pre-industrial levels. Seventy per cent of extreme weather events studied since 2012 can be attributed to climate change and insured losses from natural disasters were US$134 billion in 2017, the second-costliest year on record. Such exceptions are set to become the norm. Without decisive action, we are on course to reach 2.0°C around 2050 and 3.2°C by 2100.4 At 2.0°C, the population exposed to water scarcity would increase by an estimated 388 million and annual flood damage losses.

To address this challenge, this project set out to understand ‘how banks can accelerate the financing of the low carbon economy’ and, by doing so, develop a vision for a bank of 2030.

 

Key outcomes


  1. Many banks continue to take a short-term risk-based (responsive) or CSR (Corporate Social Responsibility)-based approach to climate change. Regarding themselves as “client led”, bankers in ‘banking-as-usual’ were more comfortable taking a passive approach that responds to client demand.
  2. The key characteristic of a bank enabling its clients to transition to a low carbon economy is an active mindset – one that prioritises relationships over transactions and which is underpinned by a forward-looking attitude that sees a low carbon future as inevitable.
  3. Innovation and collaboration by empowered bank employees is essential if a bank is to accelerate the transition to a low carbon economy and secure the successful clients of the future.
  4. Measuring the financial risks stemming from climate change will enhance a bank’s appetite to support clients aligned with a low carbon economy.

The report also created a curve of change for the banking sector characterised by three stages: banking-as-usual, the transition zone and the zone of institutionalisation. Each stage has its own distinguishing feature. By moving along the curve, the report details how banks can help change the economy into a low carbon one by 2030.

Complete this form to download the report and to express interest in the upcoming Bank 2030 webinar.

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