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Oct 22, 2015

Investor coalition calls on world banks to measure carbon footprint

Coalition study says banks fail to measure, disclose or manage climate risks

The world’s largest banks are failing to adequately measure, disclose or manage the risks presented by global climate change and are missing opportunities in financing projects related to energy efficiency or renewables, according to a study financed by a coalition of institutional investors.

The study of the world’s 61 largest banks shows none are measuring their carbon footprints and many are failing to conduct climate-related stress tests or assess the carbon risks of their lending and underwriting. The research was carried out by Boston Common Asset Management and the coalition of 80 institutional investors managing $500 bn.

The coalition, which includes Friends Fiduciary, the State of Connecticut, Walden Asset Management, Cometa Investment Funds, Ethos Foundation and others, also concludes that banks are missing out on at least $4.8 tn in financing opportunities related to climate change due to a lack of a clear strategy.

‘With the Paris climate summit fast approaching, the analysis shows a worrying lack of a strategic, long-term approach to climate risk across many of our leading banks,’ Lauren Compere, managing director at Boston Common, says in a press release announcing the study. ‘We believe banks are not adequately measuring, managing and disclosing these risks. As the governor of the Bank of England said earlier this month, there is still time to act, but the window of opportunity is finite and shrinking.’

The coalition called on banks to start conducting regular stress tests, report on the carbon footprint of their financing activities, establish long-term strategies with board-level oversight to deal with climate change and report quantitative figures for supporting energy efficiency and renewable energy.

A list of the top 10 bank in terms of climate management compiled by the researchers is led by Australia’s Westpac Banking Corporation and the National Australia Bank, even though Australian banks faces some of the greatest sustainability risks in their lending operations.