Why global banks are going green


San Francisco, California, the location of the head office of Bank of the West

Author: Augustin de Kerversau, Head of Corporate and Commercial Banking, Executive Vice President, Bank of the West

August 5, 2021

“Yesterday I was smart, so I wanted to change the world,” the Persian poet Rumi wrote. “Today I am good, so I change myself.”

The banking industry would be wise to change too, and quickly.

In April, 43 global banks, including Bank of the West’s parent company BNP Paribas, joined the industry-led, UN-convened Net-Zero Banking Alliance (NZBA), committing their investment portfolios and of loans to reach net zero emissions by 2050. The NZBA is important in helping meet the goals of the Paris Agreement by mobilizing the entire financial system to address the threat of climate change. Yet not all of the major US banks, some of which are the largest fossil fuel funders, have joined this global effort to reduce and track emissions. We cannot solve the climate crisis without the banks.

Part of our low-carbon future depends on banks not making the climate crisis worse by subscribing to carbon-intensive industries.

Even if greenhouse gas emissions stopped today, lingering carbon dioxide in the atmosphere would prevent global temperatures from cooling anytime soon, according to the National Academy of Sciences and the Royal Society. This increases the urgency for banks – including those committed to protecting the planet – to take more substantial action on their portfolios. Research from the nonprofit CDP reveals that issuances attributed to banks’ investing and lending activities are 700 times larger than issuances from banks themselves.

The Bank of the West took steps years ago to ensure that what it funds and does not fund is consistent with supporting the health of the planet. We don’t have all the answers and we know there is still work to be done, but the lessons we have learned along the way can be useful for others in our industry to make changes.

We must close the climate finance gap
Funding targeting the climate crisis increased in 2018 to $ 546 billion, with the private sector providing the majority to $ 323 billion, according to the Climate Policy Initiative (CPI). However, according to the UN, up to $ 3.8 billion is needed each year until 2050 to prevent an irreversible increase in global warming. We need to close this funding gap and soon. Private banks have an important role. Indeed, banks doubled their share of climate finance between 2013 and 2018 (see table).
Motivations matter

In 2017, Bank of the West put in place policies that restrict or prohibit funding for certain environmentally harmful activities, such as hydraulic fracturing and drilling in the Arctic. And in 2018, the bank committed $ 1 billion over five years to finance a transition to renewable energy. Our policies are publicly available and we are on track to meet our fundraising target.

As a member of BNP Paribas, we were motivated to act because we believe that the private sector has a global responsibility to proactively address the climate crisis. We were motivated by a goal.

Global finance can be a game changer
A planetary crisis affects us all. With this in mind, Bank of the West has used its global reach for the betterment of our customers and the planet.

For example, we provide working capital to the US subsidiaries of major European energy companies, supporting the growth of renewable energy production across North America. This is part of our three-pronged strategy focused on the development of renewable energies, clean technologies and sustainable finance in all sectors.

We also use our balance sheet to encourage corporate borrowers to achieve more ambitious social and environmental goals. Drawing on BNP Paribas’ cutting-edge expertise, Bank of the West launched its sustainable development loan offering in April.

What is not funded makes a difference
What banks stand for and what they finance are essential. This is also what they decide not to fund. Part of our low-carbon future depends on banks not making the climate crisis worse by subscribing to carbon-intensive industries. We know that it is not easy to restrict principled funding because we have been down this path for some time. And we support the 43 global members of the UN NZBA because we firmly believe it is necessary for the planet.

I am touched by the immensity of the task that awaits us to stop the climate crisis. I also believe that our global industry, collectively, can make a significant difference.

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