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As COP28 concludes in Dubai, banks, which committed heavily to Paris Agreement goals in 2021, now face the reality of these commitments. The years 2024 and 2025 are pivotal, requiring an acceleration of efforts.
Between banks and the climate, the honeymoon phase is over. While Emirati banks pledged to mobilize $270 billion for green finance during COP28, it falls short of the enthusiasm seen at COP26 in Glasgow. The Glasgow Financial Alliance for Net Zero (GFANZ) faced setbacks, revising ambitions to maintain support from US institutions. The insurer alliance lost key members.
According to Alix Chosson, senior ESG analyst at Candriam, making commitments is easy, but implementing them with precise performance indicators marks the moment of truth. The challenging market for ESG investments, coupled with an energy crisis, complicates matters.
Science-based Target Initiative (SBTi) Shift:
The Science-based Target Initiative (SBTi), backed by the UN, adjusted its criteria, permitting banks to finance companies involved in new oil and gas projects, signaling a compromise. SBTi faced criticism for yielding to financial institutions' pressure. The move raises concerns about the fidelity of powerful financial institutions to their climate commitments.
Despite setbacks, banks increasingly tout their climate commitments. However, a blog post from the European Central Bank notes that banks heavily financing fossil fuels often emphasize green initiatives. French banks have shown progress, acknowledging the issue and making strides, especially in the gas sector.
Analysts note significant progress among French banks in addressing climate concerns. However, the years 2024 and 2025 will be crucial, with banks needing to accelerate efforts to achieve interim goals. Financing or advising on new oil and gas projects remains problematic due to potential long-term pollution. Renewable energies lack the necessary funding compared to fossil fuels to meet Paris Agreement targets.
While banks face challenges in implementing climate commitments, there is recognition of progress, especially among European banks. The need for increased efforts, particularly in financing renewable energy projects, is highlighted as pivotal years approach.