Industry Voice: Banks Set to Play Critical Role in Climate Change Fight

Transition to a low-carbon economy brings lending risks and opportunities

clock • 3 min read
Industry Voice: Banks Set to Play Critical Role in Climate Change Fight

Looking ahead to the UN's Climate Change Conference (COP26) in Glasgow this November, it is perhaps timely to consider the implications of the climate change agenda on the world's banking sector. Indeed, one of the core goals of the conference is to mobilize the world's financial institutions around their contributions to climate finance to help ensure that we meet the net‑zero targets.

As key financers of the economy, banks will play a pivotal role in the transition toward a low‑carbon economy through both green financing and efforts to align lending portfolios to the goals of the 2015 Paris Agreement on climate change, which aims to keep the global temperature rise to around 1.5oC compared with preindustrial levels. This shift will be challenging, but new opportunities may present themselves.

Pressure Building for Banks to Act on Climate Change

Leading banks are around three years into the process of addressing climate change risks on their business models. Action to date has mainly focused on screening and measuring loans for environmental, social, and governance (ESG) risks, but the pressure to do more is building from multiple fronts..

 

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