BAKU, Azerbaijan, October 12. A recent report titled State of Transition in the Banking Sector from the Transition Pathway Initiative (TPI) Centre at the London School of Economics (LSE) has raised serious concerns about the alignment of 38 international and US banks with global decarbonisation benchmarks. Utilizing its Net Zero Banking Assessment Framework (NZBAF), the TPI Centre assessed how these banks are performing in relation to their climate commitments and found significant gaps between targets and actual actions.
The report highlights that a staggering 85% of the banks assessed are still financing new coal projects, with none committing to phase out coal financing in line with the 1.5°C global warming limit. Furthermore, only 8% have pledged to stop project financing for new oil and gas fields, while none have committed to ending all financing for deforestation activities by 2025.
The TPI Centre's findings also reveal a troubling disconnect between the banks' stated net-zero targets and their practical efforts. According to the report, these targets cover less than 22% of the banks' revenues, leaving critical business segments, particularly capital markets, largely unaddressed. Alarmingly, only 19% of the banks' pathways align with targets that would keep global warming to 1.5°C or below 2°C for the period from 2028 to 2035. Additionally, the report indicates that banks lack clear short-term and long-term targets necessary to achieve net-zero emissions by 2050.
While many banks acknowledge climate-related risks, only a few have integrated these risks into their financial statements. Furthermore, there is a lack of transparency regarding how much of their total financing is directed toward climate-related initiatives.
Regional differences in commitment levels were also noted in the report. European and Japanese banks have established more targets compared to their counterparts in North America and China, with Chinese banks notably lacking any decarbonisation targets. Among the banks evaluated, Barclays, BNP Paribas, Groupe Crédit Agricole, HSBC, ING Bank, and JP Morgan Chase were identified as having set the most targets, covering eight out of the 14 assessed sectors. ING, Deutsche Bank, and JP Morgan Chase were highlighted as having the most ambitious targets aligned with the 1.5°C and below 2°C benchmarks, primarily in the electricity utilities sector.
In the United States, the situation appears dire. Only one super-regional bank has committed to achieving net-zero emissions by 2050, and none have established sectoral decarbonisation targets. Half of the banks have specific climate finance targets, while only Fifth Third, Huntington Bancshares, and PNC disclose their absolute financed emissions. Truist stands alone in disclosing its exposure to high-emission sectors.
Simon Dietz, the TPI Centre’s research director, commented on the findings, stating, “While some progress has been made since our initial assessments in 2022, banks are not moving fast enough to meet global climate goals. Without stronger action, the banking sector exposes itself—and by extension, the global economy—to greater regulatory, market, and physical risks associated with climate change.”