Banks can play their part in tackling climate change by balancing their approach to lending – providing more funds to climate-positive companies and by supporting carbon intensive firms manage their emissions.
The challenge has always been measurement. How do banks quantify the climate alignment of their loan portfolios? And, more importantly, how can they ensure they’re on course to support the objectives in the Paris Climate Agreement?
The Katowice Banks
The Katowice Banks, Standard Chartered, BBVA, ING, Société Générale and BNP Paribas, named after the Polish City which hosted the 2018 United Nations Climate Change Conference – have been taking steps to tackle the problem for the past two years.
The banks’ agreement, known as the Katowice Commitment, led them to partner with think tank 2° Investing Initiative (2DII), to pilot a methodology, open to all, allowing banks to review their lending to ensure it helps client meet the Paris Agreement goals.
Using the Paris Agreement Capital Transition Assessment (also known as the PACTA methodology) originally developed to for portfolios of equity and bonds, 2DII have created and piloted a version for bank lending.
The next step
The pilot of the tool, one of several methodologies Standard Chartered is working on, came to an end in the past few weeks and a report into its findings is published today.
While the pilot is viewed as a success, the Katowice Banks and 2DII know that they are only taking their first steps on their journey and that more hard work lies ahead, especially on global emissions data quality and client engagement. With our footprint across Asia, Africa and the Middle East, the availability of climate data remains a special focus for us.
John Gelston, our Senior Manager, Emissions & Climate Risk, and our representative for the Katowice Banks says: “This is the next step in our efforts to make sure our lending aligns with the Paris Agreement. By utilising a tool which is open to all and sharing our initial learnings, we want to encourage other banks to get involved and help with its iterative development. We’re excited to help drive a positive impact on our clients' transition journey and better support sustainable development."
Simon Connell our Head of Sustainability Strategy adds: “This is a challenge we cannot solve alone. Today’s report builds on our 2019 Emissions White Paper and TCFD report and supports our continued work with the UN’s Collective Commitment to Climate Action and fellow Katowice banks.”