Climate risk: A coal-fired power plant in the background of a town in Dingzhou, China. The UN warns that at the current pace of emissions reductions, the average temperature is on track to rise further. — AP
LONDON: The green finance targets of European banks are falling well short of what is needed, according to a fresh study by ShareAction.
An analysis by the UK-based non-profit that examined the green finance claims of the 20 biggest lenders spread across the European Union, the United Kingdom, Switzerland and Norway found that “targets and disclosures aren’t fit for purpose and could lead to misleading claims.”
The findings coincide with increasingly gloomy predictions around the planet’s hopes of limiting global warming to the critical threshold of 1.5 degrees Celcius.
The United Nations estimates the world now has only a 14% chance of reaching that goal, as fossil fuels continue to enjoy access to financing that would otherwise be spent on green projects.
At the current pace of emissions reductions, the average temperature is on track to rise three degrees Celcius, the UN warned on Monday.
ShareAction is known for pushing climate-change resolutions at banks including HSBC Holdings Plc and Barclays Plc, nudging both lenders to pledge emissions cuts.
Last year, the non-profit helped coordinate a shareholder vote at Credit Suisse, pressuring the bank – now part of UBS Group AG – to align its business with the 1.5 degrees Celcius goal of the Paris climate agreement.
Criticism of banks’ green claims feeds into a wider debate around environmental, social and governance (ESG) metrics, as investors and regulators grow increasingly wary of how the ESG label is being applied.
Against that backdrop, ShareAction found that the banks it looked at mostly have green finance targets that “fail to demonstrate” how the lenders will realistically achieve net-zero emissions by 2050.
The non-profit also criticised the industry for failing to publish methodologies that explain the metrics on which green claims are based.
What’s more, most banks include products and services that shouldn’t rightly be defined as green financing, ShareAction said.
“Banks don’t always disclose what activities count as green, and those that do consider certain controversial activities to be eligible,” the non-profit said in its report.
Given the crucial role that banks can play in steering the global economy away from environmentally dangerous activities, ShareAction is recommending the industry adopt a list of practices to help stakeholders analyse the role played by the industry.
These include publishing a transparent methodology around green financing goals, and ensuring that these targets “only cover financing activities that result in the allocation or facilitation of capital by the bank,” ShareAction said. — Bloomberg
