Citigroup and Bank of America have joined Morgan Stanley among the roster of global banks pledging to measure and disclose the impact their lending decisions have on climate change.
As members of the Partnership for Carbon Accounting Financials, the banks will also collaborate to establish industrywide standards for measuring the climate risk associated with lending activities. The PCAF, which has nearly 70 members that hold more than $9 trillion of assets worldwide, aims to push the financial industry to meet the goals of the Paris climate accord.
“By joining PCAF, we are helping to drive a consistent framework for institutions to measure financed emissions, as well as providing a useful tool in the management of these emissions, which is a critical component when addressing climate change,” Anne Finucane, vice chairman at Bank of America, said in a press release.
The two announcements, issued separately on Wednesday, would make Bank of America and Citigroup the second and third large U.S. financial institutions to join the group, and Citi’s chief sustainability officer, Valerie Smith, said she believes other large banks will soon follow suit.
Earlier this month Morgan Stanley became the first large U.S.-based bank to
“I expect we’re going to see other institutions join on in the near term because this really does need to be a collaborative effort,” Smith said in an interview Wednesday.
Citigroup also pledged to finance $250 billion in low-carbon projects as part of a new five-year sustainability commitment announced Wednesday. The company said it wants to develop new “innovative financing structures” to fund activities in areas like renewable energy, water conservation and sustainable agriculture that will help accelerate a broader transition to a low-carbon economy.
“If there’s one lesson to be learned from the COVID-19 pandemic, it is that our economic and physical health and resilience, our environment and our social stability are inextricably linked,” said Michael Corbat, Citi's CEO. Environmental, social and governance issues have “been front and center in Citi’s response to this health crisis, and evermore present in conversations with clients and partners.”
A number of banks have carved out niches in lending to renewable forms of energy or incorporated clean energy into their own operations, but few in North America have gone so far as to examine their lending practices to see how they might be contributing to climate change.
Stress testing for climate risk and disclosing the carbon footprint of lending activities is still more common in Europe, where regulators
Large North American banks have still
In its announcement Wednesday, Citi said it will test its portfolios for transition risks and physical risks associated with climate change in 1.5- and 2-degree Celsius warming scenarios. Those thresholds are notable because
Citigroup also set new internal goals for energy efficiency and waste reduction in its own operations. The company said it intends to meet its goal of sourcing 100% renewable electricity across its global footprint before the year’s end. It also said that since 2005 it has reduced its energy use by the equivalent of about half a million cars on the road for a year.
