Amid all of the high hopes and sometimes lofty or overstated goals, achievements, and elusive dreams of the COP28 conference, continuing through to the 12th of December, financial services remained one of the top industries to watch. Noted by environmental
scientists and experts the world over as key influencers of potential action, on their own parts and by their corporate customers, they are key players in efforts to confront and mitigate climate change threats.
Finance Day at the bi-annual event featured announcements from a number of commercial banks, NGOs, development banks, government leaders, and industry watchdog groups. Topics ranged from new commitments made to other trending news surrounding this most pressing
issue facing the business world and humanity at large.
For banks, the news was both good and bad. The world watched as new promises to expand sustainable financing were announced by many institutions in attendance. Meanwhile activist organisations decried and detailed the largest banks’ below-par performance
vs. their current fossil fuel financing transition promises.
Here are a few highlights of what we’ve heard thus far from Dubai and around the conference:
Climate debt allowances expanded
From the United Nations’ own info feed came
news of commitments to expand Climate-Resilient Debt Clauses (CRDCs) in lending agreements. While 73 countries in total pressed for donors to expand their use, the UK, France, World Bank, Inter-American Development Bank (IDB), European Bank for Reconstruction
and Development (EBRD), and African Development Bank (AfDB) offered new pledges to the practice. CRDCs help countries deal with climate calamities by ensuring they have "fiscal space" to invest in climate action, and they are key elements of the COP28 Global
Climate Finance Framework to improve the availability, accessibility, and affordability of climate finance.
Less-developed nations welcomed the announcements, with Mia Mottley, Prime Minister of Barbados commenting, "I want to thank you for the extraordinary courage to do the right thing. We can always bring back our debt, but we cannot bring back our society."
According to the UN, the central vision for the COP28 Framework is outlined in its Declaration at the UAE gathering, and that statement was also endorsed by India, France, Germany, Kenya, Ghana, Senegal, UK, and the USA. Andrew Mitchell, UK Minister for
Development, said: "By delivering new Climate Resilient Debt Clauses in Senegal and Guyana, the UK is allowing affected communities to temporarily pause debt repayments in the wake of a climate disaster, giving them breathing space to recover."
Multilateral Development Banks say "window of opportunity" for climate action is closing
European Investment Bank, along with nine other multilateral development banks from across the globe, was part of another joint statement on the importance of "concrete and urgent actions" to increase climate finance, country-level finance, and co-financing
with the private sector, as well as provide better outcomes measurement for climate programmes. In the
statement, the consortium of 10 development institutions outlined their combined accomplishments since the adoption of the Paris Agreement and the Kunming-Montreal Global Biodiversity
Framework, as well as the tough work still ahead to mobilise climate finance efforts more quickly and ensure a just transition in what they called "diverse contexts and regions."
UAE banks, as host country representatives, joined many other institutions and government-linked lenders making substantial financial pledges during the conference. They announced commitments to $270 billion in green finance support as part of their renewed
focus on sustainable and renewable businesses and climate mitigation solutions providers. Meanwhile, the
Sierra Club focused their attention on sharing reports on progress made, or the lack thereof, against climate strategy promises especially on the part of the global and nation-leading banks they’ve been monitoring for the past several years.
Watchdogs decry banks’ poor performance vs. promises on climate, fossil fuel transition plans
The US-based environmental action nonprofit reported that JPMorgan Chase, the largest American-headquartered bank and world’s biggest funder of fossil fuel investments and operations, had "taken some encouraging steps" in the most recent updates to its climate
action plans, noting that "Chase surpasses some of its peers with the quality of disclosures around its capital markets activities by including the full share of its underwriting in its emissions reduction targets." However, the organisation’s report also
said, "JPMC’s approach to reducing emissions in oil and gas sectors, including the bank’s decision to scrap earlier emissions reduction targets in favour of a new 'energy mix' that significantly broadened the scope for their investments in energy, are 'troubling.'"
This potentially allows Chase to use the wider range of choices to effectively hold steady or even increase its financing for oil and gas expansion projects, they warned.
Like many banks, JPMC was criticised by the Sierra Club and other climate activist organisations for not having or disclosing credible, workable portfolio transitions – meaning how they plan to exit fossil fuel promotion in their lending and operational policies
and transition to financing companies responsible for more climate-friendly energy sources. Adele Shraiman, of the organisation’s Fossil-Free Finance campaign commented: "As the world’s largest funder of fossil fuels, Chase still has a long way to go to align
its business with global climate goals. It is past time for Chase to adopt a truly transparent and credible plan that cuts off financing for the most polluting companies that fail to transition in line with those goals."
Another recent
Sierra Club report highlighted during COP28’s Finance Day graded the world’s largest asset managers, like BlackRock, Vanguard, and State Street on their "behind the curve" performance vs. their stated global climate goals. Two other studies both called
out banks for reneging on stated agreements and promises. The July report, called
US Banks’ Role in Capital Markets Reveals Hidden Pipeline for Fossil Fuel Financing,
focused on the role of the six largest US capital markets banks in providing a "hidden pipeline" for fossil fuel expansion, using Rainforest Action Network’s "Banking on Climate Chaos" profile as a key source for their analysis.
Finextra also referenced this report in an interview from the Sibos conference published two months ago.
This Sierra Club
study shared that: "From 2016-2022, the six biggest US banks —JPMorgan Chase, Citi, Bank of America, Wells Fargo, Morgan Stanley, and Goldman Sachs—have underwritten $266 billion in new bond and equity issuances for 30 of the top fossil fuel expansion companies.”
The organisation went on to accuse the banks of performing "sleight of hand" by distracting investors, regulators, and others with 'half-finished' net-zero transition plans while still funnelling money to fossil fuel companies through capital markets deals.
Banks and their clients critically important to achieving climate transition goals
Financial institutions are viewed as the linchpin for encouraging broad corporate adoption of climate change transition targets and strategies. Organisations like the Sierra Club, Rainforest Action Network, and
Ceres have all chided or cautioned the banks that continue to finance fossil fuel companies for not following through on their years-old pledges to exit these relationships in pursuit of 'cleaner' and more renewable alternatives and products. They are joining
with investor groups, governments, and even some of the banking industry’s own members in urging demonstrably quicker action to transition and rebalance their customer bases to ensure 2030, 2040, and 2050 carbon and methane reduction targets are achieved to
prevent climate disaster. As Finextra’s recent story on mandatory emissions reporting
regulations coming into force in Europe, the US, and even the State of California outlined, the clock is ticking for financial institutions to step up their speed of execution relative to their climate-action promises. If not, pressure from investors, customers,
governments and new laws and more stringent mandates might soon provide them with extra incentives to do so.