Global financial giants boost Climate Change initiatives with new framework

By Rahul Vaimal, Associate Editor
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Leading global banks, insurance companies and financial firms such as Societe Generale SA, HSBC Holdings Plc, BNP Paribas SA are now engaging in a collective effort to lower greenhouse gas emissions through their activities. 

As much as 55 firms across the globe have pledged their commitment to the SBTi framework, developed by the Science Based Targets initiative consortium to formulate specific climate goals for mortgages, bonds and other asset classes in their portfolios.

The consortium has been instrumental in assisting organizations across the globe to match their emission rates with the numbers mandated in the 2015 Paris climate agreement through business process reengineering such as managing energy consumption at office and production units.

The 2015 Paris climate agreement mandates the global community to work together and limit Earth’s temperature increase to no more than 1.5 degrees Celsius (2.7 degrees Fahrenheit)

SBTi is now focusing on how financial firms need to change their lending and investing activities to support the 2015 Paris climate agreement numbers.

As per the framework proposed by SBTi, organizations are now expected to manage their financing to curb emissions per square meter or altering electricity-generation project financing to cut emissions per kilowatt-hour within a 2-year period once they agree to validate their targets by SBTi which would assess whether the new measures are in line with the Paris climate agreement.

Ms. Cynthia Cummis, head of private-sector climate work at the World Resources Institute, one of the research groups behind SBTi remarked that “there are a number of high-level commitments out there that financial institutions are making.”

Earlier, American financial services company, Morgan Stanley committed to eliminating the net carbon emissions generated by its financing activities by 2050.

Slow movers 

During her brief over the phone, Ms. Cummis remarked that the financial sector is often seen as “a laggard on climate action” by environmental non-governmental organizations and “would like them to be a lot more transparent on what their impact is on the climate.”

She further elaborated that they “provide a structure or framework for financial institutions to show that they’re actually making progress against high-level commitments.”

Yet, few environmental NGOs have expressed their disappointment about the framework for its lack of commitment towards actionable goals. It is observed that the framework recommends action but doesn’t require the organization to phase out financing of coal companies and nor it mandates it to stop backing fossil-fuel expansion projects.

Nate Aden, a senior associate at World Resources Institute who led the framework’s development opines that one of several options that firms can pursue to reduce the climate impact of their portfolios could be divestment.

He added that SBTi sought feedback from firms and developed the framework with the intention of balancing ambition with feasibility.

The 55 global organizations which have shared their official commitment to the cause include ING Groep NV, Standard Chartered Plc and Credit Agricole SA which are part of a 30 member European contingent that has signed on to the deal.

While only 7 North American firms including Principal Financial Group Inc., Amalgamated Bank and MetLife Inc have committed, Grupo Financiero Banorte SAB de CV from Mexico made an official commitment as well.