A new report from responsible investment charity ShareAction is calling on investors to demand greater information from the banking sector about practices that incur climate risk.
The report, “Banking on a Low Carbon Future”, outlines what investor expectations should be for banks to mitigate climate risk, seek green financing opportunities, and leverage public-private partnerships to accelerate action on climate change.
Banks taking action to avoid climate risk might be winding down financial services to high carbon activities or halting the financing of coal-dependent companies altogether.
The report also calls on banks to scale up financing of sectors and activities that facilitate low carbon growth and encourages them to lobby in support of policy that accelerates decarbonisation.
Investors, as the clients, shareholders and bondholders of banks, have several levers to promote change in the sector, according to ShareAction.
“At a portfolio-wide level, the only way that investors can protect themselves against high-risk climate scenarios is through a timely and economy-wide decarbonisation” ShareAction CEO Catherine Howarth said in a related ShareAction article.
The report joins the increasing calls on investors to factor climate risk into their fund selection and monitoring processes. In December, the G20 Financial Stability Board’s Task Force on Climate-Related Financial Disclosures issued its draft recommendations to promote greater disclosure and transparency across the sector.
Such momentum across the financial sector is driving the development of innovative climate risk analysis tools and approaches. These help investors identify the extent to which the value of funds or other investments may be affected by climate change, and make alternative choices for their portfolios.