Active Stocks
Tue Apr 16 2024 15:59:30
  1. Tata Steel share price
  2. 160.05 -0.53%
  1. Infosys share price
  2. 1,414.75 -3.65%
  1. NTPC share price
  2. 359.40 -0.54%
  1. State Bank Of India share price
  2. 751.90 -0.65%
  1. HDFC Bank share price
  2. 1,509.40 0.97%
Business News/ Industry / Banking/  Top banks failed to disclose finance shares directed to climate solutions; impact seen at $1 trillion: Report
BackBack

Top banks failed to disclose finance shares directed to climate solutions; impact seen at $1 trillion: Report

Only one bank’s net zero commitments include both on- and off- balance sheet items and less than a quarter of banks have committed publicly to stop financing new coal capacities.

On ESG investing, Sebi has proposed stricter disclosure norms to ensure that mutual funds are staying true to their tag. (iStockphoto)Premium
On ESG investing, Sebi has proposed stricter disclosure norms to ensure that mutual funds are staying true to their tag. (iStockphoto)

Financial institutions are underestimating the most significant climate-related risks –with a potential financial impact of $1 trillion. Out of the 26 biggest banks in the world, none have disclosed the total share of finance directed towards climate solutions in their most recent year of reporting, according to a study of Transition Pathway Initiative Global Climate Transition Centre (TPI Centre). 

Further, only one bank’s net zero commitments include both on- and off- balance sheet items and less than a quarter of banks have committed publicly to stop financing new coal capacities, according to a report titled ‘The Green Pill’ released by SBI CAPS.

The TPI Centre’s analysis also found that only six banks have disclosed a commitment to end all on- and off-balance sheet activities that finance new coal capacity immediately. The International Energy Agency (IEA) has indicated that coal should be phased out by OECD countries by 2030, and by 2040 if the world is to limit global warming to 1.5° Celsius.

Also Read: Redefining real estate: The evolution from ESG compliance to corporate leadership

‘’While 22 banks out of the 26 assessed have set at least one sectoral target for their lending portfolio, only 6 banks have set financing conditions for high-emission sectors. This means that most of the banks’ sectoral decarbonization targets and commitments are not backed by a full set of measures to incentivise the transition of companies in that sector,'' said TPI in its study.

Most institutions are not reporting their credit risks (65 per cent), such as borrowers’ default on loan repayments and most (74 per cent) are not reporting market risks, such as stranded assets and financial asset price devaluation, showed the findings of the study, according to a CDP study from 2020 based on 300+ financial institutions.

Despite the growing momentum of financial institutions announcing net zero targets, the CDP study shows less than half of disclosing financial institutions and only 27 per cent of insurers report actions to align portfolios with limiting global warming to well-below 2 degrees Celsius.

India's focus on ESG

Earlier this month,  the government launched a special program where an individual or entity can earn green credit and trade it on a dedicated exchange. The initiative is meant to incentivise environmentally positive actions, and is a part of the ‘LiFE’-‘Lifestyle for Environment’ movement. The scheme envisages a market-based mechanism by which firms may meet their obligations in law through green credit trade.

Green Credit refers to a unit of an incentive provided for a specified activity; delivering a positive impact on the environment. The credit is generated as designed by the administrator (Indian Council of Forestry Research and Education). The administrator will also establish and maintain a trading platform, which will facilitate an active market.

 

 

 

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 31 Oct 2023, 08:43 PM IST
Next Story footLogo
Recommended For You
Banking Stocks
₹1,058.55-0.54%
₹1,494.950.97%
₹1,078.8-1.04%
₹132.85-3.5%
₹756.85-0.65%
Switch to the Mint app for fast and personalized news - Get App