The UN summit was held in New York with the goal of making companies and governments responsible for their impact on global warming, also creating practical ways for them to tackle the issue. Deutsche Bank, Citigroup, and Barclays are just some big names among the 130 banks to join the initiative.
banking team lead for the Geneva-based United Nations Environment Finance Initiative Simon Dettling commented “These principles mean banks have to consider the impact of their loans on society – not just on their portfolio,”
Why Change Now?
The new initiative has been created following increasing pressure from investors, regulators and climate activists for banks to acknowledge and address the role played and what needs to be done to strive for a low carbon economy.
Particularly under pressure are bank-funded projects that heavily involve oil and coal as public awareness for the economy’s deep reliance on fossil fuels continue to grow.
What is the New Policy?
The principles set out by the UN will ensure that lenders practice the following:
- Aligning business strategies with the Paris Agreement of 2015 that sets specific targets to curb global warming and promote sustainable goals.
- Positive impact targets and a reduction of negative impacts on the environment and people
- Promote sustainable practices to clients and businesses
- Remain open and clear about all business practices to allow for progress to be seen.
Those supporting the policy believe it will drive banks to change loan portfolios from fossil fuels to sustainable greener industries. However, some believe this will not be enough and that banks should take steps to completely phase out the financing of fossil fuel projects and agribusiness that promote the practice of deforestation.
Banks have opted into the initiative voluntary but despite this Dettling believes that banks will be very reluctant to go back on the word at the risk of harming their reputation alongside the risk of losing their signatory status.
Banks that are unable to prove they are keeping to the set-out principles will be stripped of their signatory status.
Other banks that have joined the Principles for Responsible Banking include ABN Amro, BNP Paribas, Commerzbank, Lloyds Banking Group and Societe Generale