Banks are gatekeepers of capital for much of the world economy. As environmental activists, shareholders and regulators better understand their role as enablers of the high-carbon economy, these institutions have a choice to make.
They can either be an enabler for polluting industries, providing the world’s biggest emitters with funding, or a powerful lever to cut emissions and prepare for a low-carbon future.
For now, fossil fuels still seem to be in favor. Mobilizing financial markets to support the transition away from non-renewables was among the key goals of the 2015 Paris climate accord — and have offered more than $3.8 trillion of fossil-fuel financing since the agreement’s signing.
But pressure is mounting. Coalitions of investors worth trillions of dollars have asked banks worldwide to align their climate plans with the International Energy Agency’s net-zero scenario that calls for an end to fossil fuel exploration and development, and to take more aggressive action in addressing climate change and biodiversity decline.
They have also called for banks to publish a biodiversity strategy before the October summit that covers their impacts and dependencies on the natural world, as well as a commitment to engage in the development of the Taskforce on Nature-Related Financial Disclosures.
This report features three special articles on the banking sector’s dependency on non-renewables and examines what may be involved in weening the engine room of the financial industry onto a more sustainable trajectory.
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