Global banks are falling short on their climate commitments, with most making ‘little progress’ or ‘weakened action’ on addressing climate change, a new report by the TPI Global Climate Transition Centre at the London School of Economics and Political Science (LSE) has found.
The State of the Banking Transition 2025 report evaluated banks‘ climate policies against 77 sub-indicators grouped into 10 segments, called the Net Zero Banking Assessment Framework (NZBAF).
‘At an early stage’
Some 36 of the world’s largest banks by market capitalisation and total assets were assessed as part of the study, with the TPI Centre noting that banks are still ‘at an early stage of their transition with decarbonisation targets that cover a limited set of sectors and business activities’.
On average, banks score on only 18% of the 77 sub-indicators, with the best-performing bank scoring on only a third of these sub-indicators. At the same time, the study noted, transition progress appears to have stalled, with 95% of the scores on the NZBAF remaining unchanged year on year.
‘Further out of reach’
“Given banks’ central role in the economy and their far-reaching influence on climate, their slow progress on the climate transition coupled with the recent dissolution of the Net Zero Banking Alliance suggest that the objectives of the Paris Agreement are slipping further out of reach,” commented Algirdas Brochard, banking project lead, TPI Centre.
Of the 36 banks assessed, 17 had financing targets in place for climate solutions, but the activities involved vary from bank to bank. Worryingly, none of the 36 major banks assessed have committed to end financing for new oil and gas fields or new coal capacity.
At the same time, more than three fifths (61%) of banks lack policies to incentivise the transition of their high-emitting clients.
‘Navigate the transition’
Commenting on the findings, Sonja Gibbs, managing director and head of sustainable finance, Institute of International Finance (IIF), said, “At the IIF, we see strong demand from our members for high-quality data and analytical insights that help financial institutions navigate the transition in financial markets.
“In an increasingly fragmented policy and regulatory landscape around sustainable finance, the work being done to help understand banks’ progress and improve the transparency and availability of transition-related information is a valuable contribution to informed dialogue between banks, investors and policymakers.” Read more here.
