What should banks do to save the world?

I was surprised to be voted one of the leading thinkers on Climate Change by Thinkers360 …

It’s probably based on my last book, and I don’t think of myself as a climate change person. I’m more of a biodiversity person. As an animal lover, I’m really angry about the loss of animal habitats. From Palm Oil farms in Asia to destruction of the Amazon Rain Forests … that’s what angers me.

The WWF’s Living Planet Report 2022 finds wildlife populations have declined by an average 69% in the past 50 years

So, I was very interested in a new report from Oliver Wyman, who just produced a report saying that corporate banks need to step up to net zero commitments. They frame this in a framework of five key things banks need to do to encourage their treasury users to be committed to, if they want to support climate change.

Interesting. Here is the executive summary and definitely worth a read:

At the United Nations Climate Change Conference (COP26) in November 2021, finance took a central role in the global climate agenda for the first time, under the banner of the Glasgow Financial Alliance for Net Zero. More than 100 banks have now joined this effort, committing to reach net-zero financed emissions by 2050, and to dramatically reduce the carbon intensity of their lending by 2030.

Corporate banking divisions are at the forefront of this effort. Corporate relationships account  for a large share of portfolio emissions for many banks, so will play a big role in meeting group commitments. Yet this is not only about meeting emissions targets. The transition to a low carbon economy is already driving major shifts in value within and across sectors; taking a lead on this issue will deepen client relationships and position the business for growth.

Industry leaders have already made big strides to build new capabilities, launch new  propositions, and to adapt the way they do business. But there is much more to do. This paper focuses on actions required within corporate banking divisions and sets out five key priorities to make the commitments real:

🎯 Engage with clients. The most important role banks can play is partnering with their clients to help drive change. Delivering across the corporate franchise will require new capabilities, systematic campaigns, and broad training of existing teams.

🎯 Build new propositions. Many green opportunities are very competitive and low margin, while higher-reward opportunities are high risk and complex to deliver. Banks must focus on a small number of the most impactful initiatives where they can innovate and collaborate.

🎯 Set portfolio-emissions targets. Group commitments must be cascaded into sector and portfolio-level targets that are carefully calibrated to balance ambition and commercial feasibility.

🎯 Embed climate considerations across the corporate bank. Translating targets into action means changing the way decisions are made—including new metrics to assess performance and changes to the credit-underwriting process.

🎯 Develop climate analytics. Given the complexity and emotion of the climate challenge, bankers need robust and granular data in a format that can support decision-making and client dialogue.