BankTrack.org - pages - Climate change

Result of climate change in Africa (source: www.transitionnow.org)

what is at stake

Global climate change is the planet's greatest environmental challenge, directly threatening the prosperity, livelihoods and immediate security of billions of people worldwide.

There is overwhelming scientific consensus that most of the observed increase in globally averaged temperatures since the mid-20th century has been due to the increase in human-induced greenhouse gas (GHG) concentrations in the atmosphere (carbon dioxide, methane, nitrous oxides and a number of gases that arise from industrial processes). The most important GHG is carbon dioxide, which is emitted mainly as a consequence of global fuel combustion, with land-use change (especially deforestation) providing another significant but smaller contribution.

-readmore-

If annual emissions were to remain at today's level, the stock of GHG in the atmosphere would reach double pre-industrial levels by 2050 - that is 550 ppm CO₂. However, as demand for energy and transport increases around the world, and fast-growing economies invest in high-carbon infrastructure this level could well be reached by 2035, causing a global average temperature increase exceeding 2°C by that year. Under such a business as usual scenario, there is 50% risk of global warming having exceeded 5°C by the end of this century, leading to catastrophic impacts on people and planet

According to the Intergovernmental Panel on Climate Change (IPCC), world temperatures could rise by between 1.1 and 6.4°C by the end of this century. This will probably result in:

Sea levels rising by 18 to 59 cm;
Increased frequency of warm spells, heat waves and heavy rainfall;
An increase in droughts, tropical cyclones and extreme high tides.
Dramatic changes in ecosystems, leading to the accelerated extinction of species

These developments are not only creating extraordinary and unprecedented risks to the global environment, but are also likely to have profound and potentially disastrous economic, social and health impacts:

Melting glaciers will cause a strong increase in annual average river runoff and water availability in some regions, together with droughts and lack of drinking water in other regions and in the long run;
Approximately 15 to 40% of global plant and animal species are at risk of extinction when the average temperature rises beyond 2° C. Ocean acidification will have major effects on marine ecosystems;
Though global food production potential is projected to increase with local average temperature rising by 1-2° C, it will decrease above this temperature. Higher frequencies of droughts, floods hurricanes and heat waves are projected to affect local crop production negatively, especially in subsistence sectors at low latitudes;
Coastal areas are projected to be exposed to increasing risks due to the rising sea-level and coastal erosion. Corals and coastal wetlands are at risk, but also many of the large cities in developed and underdeveloped countries, housing millions of people. The melting or collapse of ice sheets would eventually threaten land which today is home to 1 in every 20 people;
Poor communities can be especially vulnerable, as they tend to have more limited adaptive capacities, and are more dependent on climate-sensitive resources such as local water and food supplies;
Projected climate change-related exposures are likely to affect the health status of millions of people, particularly those with low adaptive capacity, through increases in malnutrition and consequent disorders, heat waves, floods, storms, fires and droughts, diarrhoeal disease, vector-borne diseases such as malaria and dengue fever, and other causes.

Banks are in a unique position to catalyze the necessary transition to an economy that minimizes GHG pollution and relies on energy efficiency and low/no carbon energy sources by using their commercial lending and securities underwriting to capitalize new climate-friendly activities. Venture capital and private equity can provide critical financing for emerging low-carbon technologies. Asset management, when combined with active ownership strategies such as shareholder engagement and proxy voting, can positively impact companies' climate strategies.

selected standards and initiatives

---Also read BankTrack's climate strategy paper for our position on climate change and what banks can do.---

The most important international standards and initiatives relevant for the issue of climate change are listed below.

Setting reduction targets

To date, the 1992 UN Framework Convention on Climate Change (UNFCCC) and its 1997 Kyoto Protocol is the key international treaty addressing the threat of global climate change.

The UNFCCC establishes overall global objectives and principles, and requires all member countries (near-universal membership) to report annually on their net greenhouse gas emissions.

The Kyoto Protocol entered into force in 2005, with the participation of all industrialised countries except the United States and Australia. It builds on the principles and objectives of the UNFCCC and establishes targets and timetables for industrialised countries to limit or reduce their emissions of greenhouse gases to an average of 5.2 per cent below 1990 levels. Developing countries, almost all of which have joined the UNFCC and Kyoto Protocol, are not obliged to set specific targets and timetables for addressing greenhouse gas concentrations.

-readmore-

In December 2009, the 15^th UN Climate Change Conference took place in Copenhagen, to agree upon a new treaty to complement or replace the Kyoto Protocol. The meeting failed to reach agreement on an extension of the Kyoto Protocol for the second commitment period and/or of any additional legally binding instruments under the Convention, instead agreeing to continue negotiations on these issues for at least one more year. Many, but not all, of the Parties also agreed to the Copenhagen Accord, a non-binding framework in which Parties agreed to inscribe mitigation targets and to work towards agreement on a number of objectives through the UNFCCC process.

Assessing and reporting on climate emissions

The most widely accepted standard for accounting, measuring and reporting on greenhouse gas emissions by companies is the Greenhouse Gas Protocol (GHG Protocol). Besides general measuring instruments for the companies' own activities the GHG Protocol also develops sector specific guidelines, and a standard for the emissions of products and supply chain. The GHG Protocol is consistent with the guidelines issued by the IPCC for reporting on direct and indirect emissions at a national level.

The Carbon Disclosure Project is a coalition of institutional investors which regularly asks the world's largest companies to report their annual investment-related and emissions information relating to climate change. Recently the CDP started to act as a secretariat for the Climate Disclosure Standards Board (CDSB) that was formed at the 2007 annual meeting of the World Economic Forum in response to increasing demands for standardised reporting guidelines on the inclusion of climate change information in mainstream reports. The Reporting Framework was officially launched for comment on 25 May 2009 at the World Business Summit on Climate Change in Copenhagen.

Shifting towards climate-friendly technology

A WWF study Climate Solution demonstrated that existing renewable energy sources and proven technologies could be harnessed between now and 2050 to meet a projected doubling in global demand for energy while at the same time achieving the necessary significant drop (about 60-80 percent) in carbon dioxide emissions needed to prevent dangerous climate change. This result can be achieved while excluding nuclear power, unsustainable biomass and unsustainable forms of hydroelectricity.

Designing and building sustainable, environment-friendly buildings is of great importance to affect the greenhouse gas emissions in the coming decades.

A September 2007 report from the UNEP Sustainable Buildings and Construction Initiative, in which United Nations Environment Program and a number of international construction companies work together, provides a good overview. A comparison of activities in the field of sustainable construction of the largest British construction companies in September 2005 is published by WWF UK and Insight Investment.

In the area of transport and logistics new technologies to reduce GHG emissions or to achieve more sustainable way of transport are available. With the EST project the OECD established guidelines for sustainable transport in 2000 and presented a new vision on transport.

content of a bank policy

Banks should play a leading role in shifting investments towards a low/no carbon economy, by setting more aggressive de-carbonisation standards than the national targets. This would help delay or halt the accelerating process of global warming.

To play this role, the following elements should be included in a bank's climate change policy:

essential elements

The bank will not invest in companies that:

Develop new coal, oil and gas extraction and delivery projects;
Develop new coal-fired power plants;
Apply the most harmful and least efficient practices in other GHG-intensive sectors, such as agriculture, forestry and transportation;
Are active in carbon trading;
Develop nuclear energy, large scale hydro power plants or carbon capture and storage projects;
Develop large scale biofuel projects with a negative carbon balance and negative socio-environmental impacts (see sector page on Power generation and sector page on Agriculture).

Furthermore, the bank will aim to minimize the extent to which its remaining activities and investments contribute to climate change by:

Assessing and reporting on GHG emissions associated with all its investments and other financial services;
Establishing sufficiently ambitious portfolio and business-unit emissions reduction targets in line with current science on climate stabilization;
Developing a set of tools to address climate issues and reduce GHG emissions across the full range of its operations and services;
Disengaging from carbon trading activities.

additional elements

The bank will:

Develop a proactive strategy for investing in energy efficiency programmes and projects for renewable energy such as solar energy, wind energy, small-scale hydropower and sustainable biomass production (see sector page on Power generation and sector page on Agriculture);

Increase support for the development and use of climate-friendly technologies and production processes, such as public transport, low-energy housing and commercial real estate, sustainable agriculture, forestry and fishery practices.

Develop products and services to help retail customers address climate change.

scores

how do we score this?

The bank has no investment policy for this issue;
The bank:
has only adopted or signed onto a voluntary standard or initiative relevant; or
has developed its own policy, but it is vaguely worded without clear commitments;
The bank has developed its own policy, that includes at least half of the essential elements;
The bank has developed its own policy and
this includes the essential elements in its lending and investment banking; or
this includes the essential elements in its asset management
The bank has developed its own policy and
this includes the essential elements in its lending and investment banking as well as its asset management; or
this includes both the essential and additional elements in its lending and investment banking; or
this includes both the essential and additional elements in its asset management;
The bank has developed its own policy and this includes both the essential and additional elements in its lending and investment banking as well as its asset management.

Brazil \| Itaú-Unibanco	1
United States \| JPMorgan Chase	1
Belgium \| KBC	1
Italy \| Intesa Sanpaolo	1
Netherlands \| ING Group	1
United States \| Goldman Sachs	1
United Kingdom \| HSBC	1
China \| Industrial Commercial Bank of China	1
Japan \| Mizuho	1
South Africa \| Nedbank	1
Italy \| UniCredit Group	1
Germany \| WestLB	1
Australia \| Westpac	1
Switzerland \| UBS	1
United Kingdom \| Standard Chartered	1
Netherlands \| Rabobank	1
Canada \| RBC	1
Spain \| Santander	1
Norway \| DnB	1
Belgium \| Dexia	1
Japan \| Bank of Tokyo-Mitsubishi UFJ	1
United Kingdom \| Barclays	1
Spain \| BBVA	1
United States \| Bank of America	1
Brazil \| Banco do Brasil	1
Australia \| ANZ	1
Brazil \| Banco Bradesco	1
Netherlands \| ABN AMRO	1
France \| BNP Paribas	1
Germany \| DekaBank	1
Germany \| Deutsche Bank	1
Denmark \| Danske Bank	1
Switzerland \| Credit Suisse	1
United States \| Citi	1
France \| Crédit Agricole	1
China \| Agricultural Bank of China	0
China \| Bank of China	0
China \| China Construction Bank	0

analysis scores climate change

Many banks (29) have published a position statement or climate policy, with only four banks not receiving any points. However, most of these statements focus mainly on curbing operational emissions, whereas a banks' impact on climate change through its financed emissions is much more significant.

Banks recognise their role in financing climate change by financing very carbon intensive industries, but none of the banks has translated this recognition into an investment policy with strict exclusion criteria or reduction targets with respect to carbon emissions. Several banks join initiatives such as the Carbon Disclosure Project (42) or sign up to the Carbon Principles (6) or Climate Principles (6) for which they receive a score of 1. Banks also publicly state their intentions to increase investments in renewable energy and innovations that help societies' transition to a low carbon economy but such statements are hardly ever translated into clear investment and exclusion criteria.