The Climate Lending Comet: What does it mean for banks to 'pick up the pace' on climate action?
By James Vaccaro, January 2022
If you work anywhere close to the field of climate and sustainability, 2022 is likely to have kicked off with only one cultural reference point: Don’t Look Up. It’s been a film phenomenon that’s been harder to avoid than an actual comet hurtling towards you. Striking though they are, the messages haven’t always landed neatly for everyone. In the real world, the citizens of planet ‘finance’ don’t necessarily represent the same polarisation portrayed in the film. Sure, there might be pockets of denialism, but for the most part sustainability concepts have been integrated in the mainstream, so financial institutions know that the comet (climate crisis, biodiversity crisis etc) is coming. The financial world is stocking itself full of ESG, disclosure and sustainability scientists, busily scurrying around producing graphs, charts, analysis and reports.
Climate Safe Lending is focused on banks – where decarbonisation strategies in loans over the next few years could determine what is ‘baked into the economy’ of 2050 and beyond. If we accept that most of the banking sector is all ‘looking up’ – then what’s the problem? It’s certainly more nuanced than a problem of awareness.
What I observe is that many financial institutions are so busy doing the scurrying round, complying with the panoply of frameworks, that they’ve not realised that not enough of what is being produced is actually impacting the comet (I mean climate). The narrow focus of inward-ESG risk management attempts to keep financial institutions ‘safe’ while the world breaks down. That, despite the largest rollout of an online education program on how ‘no one is safe until everyone is safe’ in world history (in case you missed it, look up ‘Covid-19’ – available for at least the next few years!)
Many financial institutions are turning towards how to make improvements to their external climate outcomes and to move incrementally towards better practices. Net Zero targets, transition plans, green finance commitments and sustainable-labelled products all add up. But many of these initiatives are still in the ‘safe space’ of green growth – the win-win narrative that provides positive outcomes but avoids the more courageous decisions that have an actual cost, and often produce negative impacts that outweigh positive initiatives. Unless the outcomes are judged in relation to the pace of change required (to address the climate crisis) then it can look like shooting an incoming comet with a battery of water pistols.
It will take a growing movement of banks to take the next step into a ‘brave space’: working through the organisational and financial pain of stopping flows of finance that cause harm; embracing the discomfort that comes with more proactive engagement to step up the rate of transition; mobilising collective agency to advocate for new regulations (top down); and supporting new innovative climate solution markets (bottom-up). It’s only by leaning into the productive discomfort of transition planning beyond win-wins that the banking sector can avert locking in a climate breakdown with financial losses that can’t be bailed out.
So when we talk about ‘picking up the pace’ it doesn’t mean triggering banks and financial institutions to press fast-forward on what they are doing. Ironically, it probably means pressing pause on the scurrying around, and critically reflecting on what is really needed here? What is the outcome that we collectively need to achieve? Who are my allies on this new journey and how can I leverage the energy of others? What can I most effectively contribute in this moment?
Those are the questions that we face together. When the bankers, investors, NGOs, academics and regulators come together for our next convening on 10-11 February there will be an invitation to ‘slow down’ in order to ‘speed up’. To listen to the system and sense what we really need to do. Because for all of the progress and attention in sustainable finance over the last decade, there’s still no compliance checklist for climate action to neatly tick the box and sit back.
To learn more about the upcoming Network convening, reach out to us at connect@climatesafelending.org
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