3 climate action banks need to take to accelerate net zero in 2022

This post was written by Gabriel Malek, Project Manager, Investor Influence at EDF+Business

This week, Citi released new interim decarbonization targets, building on a spate of climate commitments from some of the world’s largest banks late last year. From Goldman Sachs to HSBC, banks ended 2021 with important first steps toward long-term emissions reductions, highlighting the financial sector’s growing ambitions to reach net zero.

To build on these advances in 2022, banks will need to take an even more resilient stance on climate change proactive environmentalists instead reactive market participants.

So far, 101 banks – with $67 trillion in assets – have joined the Net-Zero Banking Alliance, convened by the UN in April 2021. But only a small fraction of these banks have published sector-specific targets for funded issuance.

Passive participation in industry climate coalitions does not mean leadership. Instead, to effectively manage the energy transition, banks should implement transparent decarbonization plans for 2030, paying special attention to the following three measures.

1. Set minimum standards for CO2-intensive financing.

Even banks with 2030 decarbonization plans have not yet linked their emissions reduction targets to high impact sectors with consequences – corporate clients can access capital regardless of their carbon footprint.

To strengthen their energy transition strategies, banks should set minimum standards for continued financing of high-carbon businesses and make it clear to customers that lending and acquisitions for projects that do not cross the bar will be restricted.