A new lending strategy
We want to see every major bank publish an ambitious, group-wide strategy on climate change, which details the scenario the bank intends to align with. The strategy and its associated policies and targets should not just be approved by the board, but actively championed and driven by the board. This will ensure action takes place right across the organisation, rather than sitting solely with a sustainability team. At the time of research, we found only five banks that have climate change as a standing board agenda item.
Every aspect of the capital-allocation process should have climate considerations embedded within it. And lenders need to look at both negative exclusion – not lending to GHG emitters – and positive inclusion – lending to companies that provide climate-change solutions.
We want the emphasis to be on supporting sustainable business. For example, HSBC has committed to between USD750 billion and USD1trillion of sustainable financing over the next 10 years. Some banks are now offering better lending rates to companies with higher ESG credentials, and there is a growing market for green loans or sustainability-linked loans.
Sustainable retail lending
The emphasis on prioritising sustainable lending no longer applies only to business customers. Dutch bank ABN Amro says its mortgage book causes more GHG emissions than its lending to mining or industrial companies, so we want to see banks rolling out ambitious new ways of doing business with their retail customers with an emphasis on climate-change action. Last year, NatWest launched the UK’s first ‘green mortgage’ offering lower interest rates to borrowers for more energy-efficient homes. Natwest also plans to assist existing customers fund green home improvements at cheap rates through their current mortgage. Lloyds is looking to expand its lending for electric vehicles.
For us, a key concern is that retail banks are well behind their corporate peers in quantifying the carbon footprint of their loan book. Both Lloyds and NatWest have pledged to halve the emissions linked to their loan books, but have yet to work out how high these emissions are.
We want to see every major bank, both corporate and retail, divesting from companies that won’t improve their sustainability, offering green finance to customers who will, carbon foot printing their loan book and getting serious about reducing emissions. There is no time to lose – the moment for action is now and the opportunity for positive change and growth is enormous.
*According to a report co-authored by NGOs Rainforest Action Network, BankTrack, Indigenous Environmental Network, Oil Change International, Reclaim Finance and Sierra Club.
