Tuesday, July 16, 2024
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Investors Urge Banks to Disclose Climate Risks in Support of Paris

A group of 100 institutional investors with almost USD 2 trillion in assets has called on 62 of the world’s largest banks to take action to protect humanity from the worst impacts of climate change. The call was made in a letter coordinated by the non-profit ShareAction and Boston Common Asset Management.

The increasing frequency of tropical storms and hurricanes like Irma has added urgency to efforts by pension funds and asset managers to help fight climate change and green the economy.

The investors stress that in the wake of the Paris Climate Change Agreement, the banking sector has a vital role to play in ensuring that the world is well on its way towards meeting the Paris Agreement goal of making finance flows consistent with a pathway towards low greenhouse gas emissions and climate resilient development.

Recognizing the climate-related risks and opportunities banks are faced with, the investors aim to assess how banks are responding to climate change and the Paris agreement.

“We are reaching out these 62 global banks…to assess whether there has been progress made since the Paris agreement on how climate risk is being management at both the individual bank and industry level,” says the letter.

Measures to limit global warming to less than two degrees Celsius and the transition to a low carbon economy could require an investment of over US$90 trillion by 2030.

Isabelle Cabie, Global Head of Responsible Development at Candriam Investors Group, says: “As a result of climate change and the low-carbon transition, banks now face risks and opportunities that are real, wide-ranging, material to investors. As long-term investors, better disclosure of climate risk allows us to judge how specific banks are performing compared to their peers, and so we ask that banks pay heed to this important call from the investor community.”

The letter has been sent to the top leadership of banks including HSBC, Lloyds, Deutsche Bank, Bank of America, Morgan Stanley and JPMorgan Chase, asking for disclosure of climate-related risks and details of their plans to support the transition to a low carbon economy.

The letter calls for more robust and relevant climate-related disclosure to be supplied to investors on four key areas: climate-relevant strategy and implementation, climate-related risk assessments and management, low-carbon banking products and services, and banks’ public policy engagements and collaboration with other actors on climate change.

A recent study estimates that the value at risk under business-as-usual scenarios may be equivalent to a permanent reduction of between 5% and 20% in portfolio value in just over a decade.

The initiative has drawn support from investment managers including the National Employment Savings Trust, the Environment Agency Pension Fund, Hermes and Jupiter, along with Boston Common Asset Management.

Read the ShareAction press release here.