Financial Institutions Net Zero Tracker
Banks have made headlines in recent years for committing to reach “net-zero emissions” by 2050 and pledging to mobilize trillions of dollars in the fight against climate change. Indeed, banks will play an important role in halting global warming: Companies rely on them to help finance the zero- and low-carbon technologies and solutions that will build a greener, safer future. Their commitment to the cause is essential.
But are banks on track to fulfill their promises? Do their current actions and financial flows align with stated climate goals? And which banks are leading the way on achieving net zero — or falling behind?
WRI’s Financial Institutions Net Zero Tracker was designed to answer these questions.
Financial Institutions Net Zero Tracker
WRI’s Financial Institutions Net Zero Tracker analyzes a sample of 25 banks across 10 countries. The sample includes banks with large total assets as well as smaller firms playing a prominent role in net-zero finance.
The Tracker analyzes banks’ net-zero commitments across four themes: Transparency and Ambition, Implementation, Credibility, and Nature and Equity. These four themes offer a comprehensive view of the scope and quality of net-zero commitments. The framework starts with the ambition banks have set for net zero; then it looks at how they are following through on commitments, the credibility of their actions, and how they incorporate crucial protections for nature and promote an equitable and just transition. It also highlights leading practices to give banks a path toward higher ambition and more robust execution.
Main Findings
The Tracker contains a wealth of data, allowing for detailed analysis of banks’ net-zero commitments. Here are some of our key findings derived from the data:
1) Net-zero commitments can’t be taken at face value and are not all equally ambitious or credible.
While many banks have pledged to reach net zero, the breadth and depth of their commitments vary significantly. Many leave out important elements that should be part of a comprehensive net-zero strategy, such as aligning public policy engagement with net zero and creating an incentive structure that ensures senior leadership will pursue implementation.
In fact, no banks in our sample performed well on the complete set of indicators that would correspond to a comprehensive net-zero commitment. Banks leading in one aspect of net zero are often lacking in others. Greater transparency and standardization on banks’ net-zero commitments has the potential to improve comparability and help raise the overall quality of commitments across the banking industry by highlighting leading practices and discouraging lagging ones.
2) Banks’ targeted emissions reductions are not aligned with holding global warming to 1.5 degrees Celsius (1.5 C).
Except for the power sector, banks’ current portfolio emissions and their emissions reduction targets are not in line with the sectoral decarbonization pathways needed to limit warming to 1.5 C. For example, their average emissions target for the auto sector is almost triple the level needed by 2030, highlighting the large gap between targets and net-zero benchmarks. Additionally, there are significant gaps between banks themselves in terms of approaches, coverage and reduction rates.
3) Banks still provide far too little green financing compared to fossil fuel financing.
As part of their net-zero commitments, banks have often announced large “headline” numbers on sustainable finance targets, committing to raise billions to trillions of dollars for sustainable goals, including to address climate change. The International Energy Agency (IEA) estimates that investments in clean energy vs. fossil fuels will need to reach a 10-to-1 ratio by 2030. However, the median ratio of green finance to fossil fuel finance for our sample was merely 1.3-to-1 between 2018 and 2022, despite the broad inclusion of financing activities under “green” finance. Financing for fossil fuels must be phased out, while green finance needs to be rapidly scaled up to provide the investments necessary to achieve net zero.
Background
To limit global warming to 1.5 C above pre-industrial levels and avoid a climate catastrophe, the world needs to reduce greenhouse gas emissions by about half by 2030 and reach net-zero emissions around mid-century.
Financial institutions, including banks, can accelerate the decarbonization of key high-emitting sectors through corporate engagement and investment decisions and channel capital toward investments that build a resilient net-zero economy. Since the Paris Agreement in 2015, commitments to reach net-zero emissions have been made by countries, cities, and companies, including financial institutions. More than 650 financial institutions, representing 40% of global private financial assets, have made commitments to reach net-zero financed emissions by 2050 under the Glasgow Financial Alliance for Net Zero (GFANZ) global coalition. Additional firms are making commitments independently.
Our Financial Institutions Net Zero Tracker analyzes a sample of 25 of these banks spread across 10 countries. It includes banks with large total assets as well as smaller playing a prominent role on net zero.
About
You can find details on the methodology, sample selection, limitations and data sources in our technical note. You can also find the full dataset in Excel format along with the links for the company reports used.
Banks’ data collected from publicly available reports as of November 2023. Net zero commitments and relevant corporate climate policies are being announced and updated at a fast pace. Concurrently, climate science and net zero−related methodologies continue to evolve. As a result, the tracker may lag in presenting the latest data and methodologies. For any questions or requests to correct and update data, please email anderson.lee@wri.org, amanda.carter@wri.org, or lihuan.zhou@wri.org.
We would like to thank the engagement from reviewers, contributors and banks during the development of the tracker. We would also like to thank the data sources CDP, Banking on Climate Chaos, Forest 500, Science Based Targets Initiative, Taskforce on Nature-Related Financial Disclosures and Transition Pathway Initiative.
This project was partially funded by a grant from Bank of America.
