Banks’ climate data: leave it to the amateurs
Complex methodologies have got us nowhere - perhaps deliberately
We all know banks are ramping up their efforts to support the transition to low carbon energy… sustainability journey… yada yada yada.
We might get there one day.
But where are the banks now? Are they actually a force for good, in climate terms, or still making the problem worse?
Don’t try and ask a bank CEO on an earnings call. Or a banks analyst at an investment bank. Or the rating agencies. Don’t even ask the worthies at the Banque de France and De Nederlandsche Bank who have put so much effort into stress testing banks for climate risk.
The answer, if you get one, will be long, boring and light on anything resembling meaning.
It is six years since Mike Bloomberg and Mark Carney launched the Taskforce on Climate-Related Financial Disclosures, which was supposed to bring all the material climate risks and opportunities out into the open, so the market could reallocate capital to avoid the stinkers and pick the roses.
But is there now an easy way for an investor, or any other stakeholder, to look up what one bank’s climate exposure is, and compare it with another?
Everything about banks’ behaviour since the Paris Agreement was signed suggests that is the last thing they actually want. They contrive to look busy, without actually revealing the key figures that would allow their overall climate contribution to be evaluated.
Now, a group of NGOs and researchers including Profundo has done in a few months what the whole global banking and regulatory system, with all its resources, has taken years not to do: produce some basic, graspable figures on how much money each of the top 60 banks is mobilising for renewable energy, and how much for fossil fuels.
It is not pleasant reading. The grandest banks of Wall Street and the City, vocal members of the Net Zero Banking Alliance and Glasgow Financial Alliance for Net Zero, are putting about $2 into renewables for every $98 into oil, gas and coal.
Guess who’s beating them hollow? Not just the Nordic, Dutch and Spanish banks — but the much larger Chinese sector.
The figures are not perfect, as GFanz was quick to point out. That’s right, they’re an estimate. Who has better data, but is not revealing it? The banks.
The banks’ own carefully calibrated and collegiately discussed methodology will start to produce figures this year, GFanz promises.
That will be interesting to see. Perhaps this super sophisticated machine will dissect the problem of whether banks are making climate change better or worse with startling clarity.
A safer bet is that, a year from now, the Profundo figures will still give a better handle on the problem.
The banks could follow its example and start simple. How much renewables funding, how much fossil? It tells you most of what you need.