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Bank 2030: Accelerating the transition to a low carbon economy

30 January 2020 – This report authored by the University of Cambridge Institute for Sustainability Leadership’s (CISL) Banking Environment Initative (BEI) highlights the need for banks to develop an ‘active mindset’ in order to accelerate the transition to a low carbon economy.

Bank 2030 Accelerating the transition to a low carbon economy

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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.

Global warming currently exceeds 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. Without decisive action, global temperatures are expected to reach 2.0°C around 2050 and 3.2°C by 2100. At 2.0°C, the population exposed to water scarcity is estimated to increase to 388 million.

To address this challenge, this project set out to understand how banks can accelerate the financing of the low carbon economy and develop a vision for what a climate progressive bank should look like.

The research was based on 100 interviews, including 88 with senior bankers in Europe, Asia and the Americas.

 

Key findings

  • 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”, these bankers were more comfortable taking a passive approach that responds to client demand.
  • 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.
  • 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.
  • Measuring the financial risks stemming from climate change will enhance a bank’s appetite to support clients aligned with a low carbon economy.

 

The Bank 2030 Vision

The vision of Bank 2030 is one of proactive engagement with low carbon opportunities that will transition client business models, in the belief that these actions are essential to future returns, management of risks and maintaining societal licence to operate.

The report outlines 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. The report details how, as they move along the curve, banks can help to transform the economy to a low carbon one by 2030.

 

Bank 2030 model of change

 

 

Grant providers of the Bank 2030 project

  • BNP Paribas SA
  • Morgan Stanley
  • Deutsche Bank AG
  • Landesbank Baden-Württemberg
  • Lloyds Banking Group plc
  • Morgan Stanley 
  • Santander Group Banco Santander SA
  • Standard Chartered Bank
  • Wells Fargo

Participants of the Bank 2030 project

  • Barclays plc
  • Low Carbon Contracts Company ltd
  • Sappi Limited
  • ABN AMRO
  • Fideicomisos Instituidos en Relación con la Agricultura
  • GIC Group Limited
  • International Finance Cooperation (World Bank Group)
  • Jaguar Land Rover Limited
  • Partnerships for Forests
  • Rail Safety and Standards Board Limited
  • Siemens Public Limited Company
  • Sterlite Power Transmission Limited
  • Wates limited
  • Willmott Dixon Limited

Citing this report 

Please refer to this report as University of Cambridge Institute for Sustainability Leadership. (2020). Bank 2030: Accelerating the transition to a low carbon economy. Cambridge: University of Cambridge Institute for Sustainability Leadership.


Complete this form to download the report, and watch a recording of the Bank 2030 webinar.

 

Published: January 2020

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Authors and acknowledgements

The authors of the report were Grant Rudgley, Jasminka Enderle and Dr Nina Seega at the CISL Centre for Sustainable Finance. The team was supported by Anna Lowe, Thomas Verhagen, Kajetan Czyz, Nick Villiers, Dr Jake Reynolds and Andrea Gangheri at CISL.

We are also very grateful to our Expert Group – Dr Paul Fisher (former Deputy Head of the UK Prudential Regulatory Authority), Sean Kidney (CEO of the Climate Bonds Initiative) and Mark Lewis (Head of Sustainability Research at BNP Paribas Asset Management) – for their guidance throughout and peer review.

Last but not least, we would like to thank the industry experts involved in this project, the participating members of the BEI; BNP Paribas, Deutsche Bank, Lloyds Banking Group, Santander and Standard Chartered, and the other contributing banks; LBBW, Morgan Stanley and Wells Fargo. Without their support, time and insights, this report would not have been possible.

Disclaimer

The opinions expressed here are those of the authors and do not represent an official position of the group of banks.