Banking Industry Net Zero Report
The Climate Bonds Initiative (CBI) releases Banking Industry Net Zero Report, which aims to summarize the status of net zero disclosure in the banking industry and provide recommendations.
The Climate Bond Initiative believes that the banking industry is at the core of the global economy’s net zero transition. The banking industry has made significant progress in the net zero framework and disclosure, but there is still room for improvement.
Related Post: Net Zero Banking Alliance Releases 2024 Progress Report
Net Zero Status in Banking Industry
The Climate Bond Initiative analyzes the net zero status of the banking industry based on public reports released by five Global Systemically Important Banks and reaches the following conclusions:
- Lack of comparability in net zero disclosure: Different banks have different choices in net zero disclosure, resulting in lower comparability of information disclosure among different banks. For example, different banks have different definitions of information on high carbon emission industries, or different methods of calculating risk exposure, and net zero disclosure exists in multiple locations such as climate reports, ESG reports, and sustainability reports. The main reason for this phenomenon is that banks are in the early stages of developing net zero disclosure and lack consistent disclosure methods.
- The scope of net zero disclosure is unclear: Bank net zero disclosure rarely covers all on balance sheet and off-balance sheet activities, usually limited to bank accounts and corporate risk exposures. Some banks have not disclosed the coverage of this information, making it difficult for investors to measure the weight of net zero risk in the total credit risk.
- The net zero target is inconsistent with 1.5 degrees Celsius: 24 out of 29 systemically important banks plan to achieve net zero by 2050, but the net zero path of existing banks is not consistent with the 1.5 degrees Celsius warming target. Currently, only 19% of banks meet the net zero target of 1.5 degrees Celsius, which may be due to incomplete Scope 1, Scope 2, and Scope 3 in net zero target.
- Insufficient net zero capital investment: Although banks plan to invest a large amount of funds to support the net zero transition, according to green finance data analysis, these capital investments are not sufficient to achieve the net zero target. The International Energy Agency (IEA) predicts that investment in clean energy will need to reach 10 times that of traditional energy by 2030, which is currently only 1.3. Most banks have not developed clear strategies on how to increase net zero financing to predetermined targets in the coming years.
Recommendations for Net Zero in Banking Industry
To achieve net zero, the Climate Bond Initiative provides the following recommendations for the banking industry:
- Establish net zero standards for banking departments and business activities and set consistent information disclosure indicators.
- Disclose the proportion of net zero in business and balance sheet for investors to understand.
- Strengthen the connection between the bank’s net zero target and net zero strategy of its jurisdiction.
- Record the bank’s actions in net zero financing and develop detailed financing plans.
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