- Bank CEOs still feel the need to bang the “climate change is real” drum.
- Are private banks doing enough to solve climate change together?
- Individual climate reports are valuable, but more bank collaboration is needed.
When wishing to take the pulse of a market I find it useful to read the CEO letter of an annual report of a bellwether company within it – not necessarily for the substance, but certainly for the intent.
Take ING, which recently published its 2023 Climate Report. The chief executive, Steven van Rijswijk, offers a healthy dose of substance and intent but what was most striking was his opening line: “Climate change is a fact”.
Well, yes. It is a fact. Surely, we can all agree on this, no?
The tone of van Rijswijk’s opener suggests that his investors, customers, and stakeholders may require more convincing. Despite all we have witnessed in the last few years – record temperatures, record melting of ice sheets, dramatic weather events – few but most of the stubborn or data-allergic should surely see it is true.
So, either Rijswijk is just adding the remark for effect or, more likely, he is battling to get a very simple point across to the people and institutions who have the power to influence it.
He writes: “The latest climate science sends a clear warning that we only have a small window of opportunity still open to limit global warming to 1.5°C… We all – governments, NGOs, businesses, and individuals – have a part to play, and we can all make a difference for present and future generations if we work together towards the same goals.”
Despite it being 2023, it is depressing to see leaders continue to state the obvious: the need to work on the same team when it comes to climate change. While Rijswijk expresses optimism that this can be achieved, the bare truth is that we are collectively struggling to do so. Many seasoned scientists believe the 1.5°C target is out of our hands now.
This is not a criticism of ING or Risjwijk. Albeit far too long (at 115 pages), buried within ING’s climate report are invaluable insights on how the bank is working to achieve net-zero goals; development of its Terra project – a serious attempt to support the net-zero transition of its most carbon-intensive client base – makes for especially useful reading, for example.
Like many, ING faces a lack of rich emissions data to work with, something ING wishes to be resolved at a pan-regulatory level. Rijswijk notes: “Emissions and other climate-related data, whether at client or sector level, can be incomplete, out-of-date or otherwise patchy.”
Collaborate: a direct plea
Okay, fine. Banks do need better data. But what is also patchy is any meaningful insight into how the banking sector is collaborating to mitigate climate change. Yes, there are a host of alliances for lenders to sign up to, but what about outcomes of partnership-based activity?
It would be great to see commercial and investment banks get together to produce reports on how they are as a sector making a difference. What deals they worked on together, and how they resolved sticky issues to get those deals over the line.
You already see multi-lateral development banks prepared to collaborate. In fact, the most recent joint report was just published outlining multilateral development banks’ (MDBs) aggregate climate finance figures and an explanation of working methodologies for tracking it. The headline data should prove encouraging for some: globally, climate finance provided by MDBs reached nearly $100bn in 2022, up from $82bn, and compares to the $69bn supplied by private finance in the same year.
MDBs do have a different mandate and ownership structure compared to private banks, but would it be too much to ask the leaders of the world’s most influential to provide the same level of enthusiasm to create something similar?
Could the top CEOs get around a table, select a handful of metrics and targets they can all agree on (such as standardising how to account for “mobilising” sustainable finance, for example), get an independent body to support those metrics, and share the results in one simple, easy to understand document?
It would not be a perfect mirror of the world, but it would provide invaluable insights and prove that, despite how competitive the banking sector can be, it can find ways to come together for the greater good.
Let’s hope the next set of annual climate reports is published, there is less need to state the obvious about the need to collaborate, and more on how actual collaboration has borne fruit.
And, if possible, do it in less than 115 pages, please![Read more: ESG reporting]