#divestthedirt – latest update.
Last Autumn, in our #DivestTheDirt campaign, we asked you, the POW community, to engage with your bank to better understand the substance of their commitment, to show we are watching our banks and how they use our money, and to get provided with some details about agreed timing and concrete deliverables.
Why were we doing this?
The banking sector is a key player in the expansion of the fossil fuel sector, providing the investment and capital for new fossil fuel exploration and development. And they use our money to do it. In fact the way your personal and retirement funds are managed can be 21 times more effective at cutting carbon footprints than stopping flying, becoming a vegetarian and moving to a renewable energy provider combined.
1. How my money is invested and its compatibility with the goal of achieving net zero by 2050 to meet the Paris 2015 agreement is a key decision maker in my choice of bank.
Please provide details of how the (name of bank) aligns its investments with the Paris 2015 climate target.
2. The International Energy Agency has stated that to meet the 1.5°C target in the Paris Agreement, there should be no more development of new oil, gas, or coal beyond 2021.
Can you confirm that (name of bank) has a policy preventing the issuing of loans for and/or any financing of new fossil fuel extraction?
13 banks responded, a good representation of the banking sector in Europe, especially as many banks are subsidiaries of larger organisations that responded provided meaningful responses.
Expert analysis of these responses found:
Most, if not all, banks’ objectives are aligned with the Paris Agreement goal.
Most banks and banking groups have joined international climate change related coalitions and/or have signed international conventions related to climate change (e.g. United Nation Principles for Responsible Banking, Glasgow Financial Alliance for Net Zero – GFANZ, Net Zero Banking Alliance, etc.)
For more on our analysis of GFANZ see our report from COP26 HERE
Only a few banks have set ambitious carbon emissions objectives. Most banks remain committed to high-level principle-based objectives. No clear methodologies were detailed on how to reach the Paris Agreement goal and what kind of metrics they would want to be measured against.
The main approaches disclosed were mainly focused on gradually excluding the most harmful sectors (coal mining, some oil and gas activities) from their financing but did not mention any active support to climate-friendly initiatives and innovations.
What about the global climate conference in Glasgow (COP26)?
LAst year COP26's goals were to:
secure global net zero by 2050 and keep 1.5 degrees within reach and
adapt to protect communities and natural habitats.
To achieve these goals the financial sector had a key role to play, and Finance was one of the core topics at COP26
Banks, insurance companies and investors need to align their investment and lending activities to the transition to net zero by the middle of the century. Priorities for private finance for COP26 were set to create a virtuous cycle of innovation and investment for net zero in which every financial decision takes climate change into account.
To make this happen, private finance should direct funding towards companies committed to focusing their business models on net zero. Calls for actions were issued to develop an adequate finance framework around four goals:
Reporting – improve climate-related financial disclosures,
Risk Management – assess climate-related financial risks and implement solutions,
Returns – alignment of investments and own operations to net zero
Mobilisation – finance emerging and developing economies transition to net zero.
Most financial institutions publicly support the above plan and claim that they are implementing changes in their strategies to align financing and own operations to net zero.
The latest and most stark warning of our climate breakdown from the 2021 IPCC Report makes it clear that immediate action needs to be taken. In order to meet the 1.5°C target in the Paris Agreement, there should be no more development of new oil, gas, or coal beyond 2021 (International Energy Agency).
Despite financial institutions showing an increased interest in the net zero target, the overall sector’s commitments are still not clear or consistent enough. It is clear from the responses to our #DivestTheDirt campaign that some banks have already significantly adjusted their strategies to achieve net zero within the required timescales. Others are relying on vague strategies and greenwashed statements whilst continuing to finance the most polluting of activities. It is more important than ever that we as citizens and clients, hold banks accountable and pressure them to do more.
Achieving the goal of the Paris Agreement requires a dramatic shift of economic actors’, progress and successes will take some time to materialize and be visible. European legislators and regulators are in the process of unveiling major regulatory changes, calling for transparency and climate-related risk management adjustments (EU Taxonomy, EU Sustainable Finance Disclosure Regulation, EU Corporate Sustainability Reporting Directive), that will gradually apply to the financial sector over the next couple of years.
#DivestTheDirt was the first step in POW’s multi-year engagement with the financial sector. Working with our partners at Banktrack / Fossil Banks we will continue to engage with financial institutions and banks also in the future. Working with you, our community, to influence these key actors and hold them accountable for their actions we can make the difference that is needed for our climate. You will be receiving regular updates from us and watch out for a next campaign in 2023.
Stay tuned for more