To meet the objectives of the Paris Agreement, we need to reduce global emissions by 7-8% per year. Yet emissions are still rising. In fact, with current pledges from national governments, the UNFCCC has predicted we will see global emissions increase by over 10% by 2030 from 2010.
“When it comes to climate change, succeeding slowly is the same as failing.” Gary Kendall, Head of Climate Strategy Implementation at Natwest.
We need urgent systemic change to avoid climate disaster. While financial institutions play an essential role in the transition to net zero, we need governments, businesses and individuals to work together to urgently reduce emissions.
The discussion highlighted that banks are important players, not just in terms of providing finance to decarbonise assets, products and services, but also in terms of thought leadership. Financial institutions can work together to help influence policy frameworks and regulations and ultimately drive more meaningful change across the industry.
"Working together, banks can shift the dial.” Paul Watchman, Special Legal Adviser for UNEP Principles of Sustainable Insurance Net Zero Insurance Alliance
Banks have a unique opportunity to help people and businesses measure, understand and reduce their carbon emissions. As banks possess customers’ transactional data, they can partner with sustainable fintechs to help customers understand the carbon emissions associated with their spending and help them adopt more sustainable behaviours. 70% of C02 emissions are driven by consumer behaviour, so there is huge potential for carbon savings.
Jonathan Ward, Senior Carbon Impact Manager at Cogo, highlighted that this also represents an opportunity for banks to attract the growing segment of conscious consumers as Cogo research shows 8 in 10 banking customers want to know more about the environmental impact of their spending.
In addition, providing spend-based emissions data for SMEs also helps banks address more of the difficult to measure scope 3 emissions, specifically relating to capital goods and purchased goods and services.
SMEs also commonly cite needing more access to finance to tackle their climate ambitions. While lending to SMEs is a significant exposure for banks, it also represents a substantial opportunity for green finance, and it enables higher levels of emissions reduction.
“There’s a lot of shared interest and data points, and that’s why I feel confident that we can unlock societal and economic change through financial institutions.” Jonathan Ward, Senior Carbon Impact Manager at Cogo.
Banks require data to measure supply chain emissions, EPC and green finance targets, but data is often insufficient and low quality. Banks need more effective data sources, tools and platforms to address climate-related data challenges.
Furthermore, data disclosure across supply chains currently paints a big red mark against banks’ emissions profiles. So there is a disincentive to disclosing this data.
The speakers highlighted the importance of improving standardisation, normalising data disclosure, and placing more emphasis on action rather than using perfect information.
Jonathan also shared how the fintech and data science industries can unlock the power of open banking to help blend financial and other data sets.
Gary stressed the importance of banks’ participation in platforms like the Glasgow Financial Alliance for Net Zero (GFANZ). These platforms allow banks to collaborate, address common challenges at scale, develop new tools and solutions, and share best practices.
“Leaving everything down to the competitive nature of the private sector could lead to a race to the bottom. We need to come together and get businesses to realise there are competitive reasons for taking climate action. If we can be successful and show it’s possible to be commercially successful by financing responses to climate change, then others will follow.” Gary Kendall, Head of Climate Strategy Implementation at Natwest.
Banks have a crucial role to play in the transition to net zero. They can use their position and power to mobilise finance to decarbonise the economy and support greater carbon literacy in society. But banks can’t do it alone. They need the support of governments, businesses and individuals to drive the level of action needed to avoid climate disaster. Everyone has a role to play.
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