Study explores banks' transition to a low carbon economy

A new study from Cambridge University explores the steps banks may be able to take to address the “challenge of our time”, or the transition to a low carbon economy. The research, published by the Cambridge Institute for Sustainability Leadership’s Banking Environment Initiative highlights the need for banks to develop an "active mindset" to help accelerate the shift.

Dubbed, Bank 2030 Vision, the initiative set out to understand how banks can accelerate the financing of the low carbon economy and develop a vision for what a climate progressive bank might look like.

Grant providers of the Bank 2030 project include BNP Paribas SA, Morgan Stanley, Deutsche Bank, Landesbank Baden-Württemberg and Lloyds Banking Group, with participants including Barclays, Sappi and ABN AMRO, among others.

Key findings (Source: Bank 2030: Accelerating the transition to a low carbon economy. Cambridge: University of Cambridge Institute for Sustainability Leadership)

• Many banks continue to take a short-term risk-based (responsive) or CSR (Corporate Social Responsibility)-based approach to climate change. Regarding themselves as “client led”, these bankers were more comfortable taking a passive approach that responds to client demand.

• The key characteristic of a bank enabling its clients to transition to a low carbon economy is an ‘active mindset’ – one that prioritises relationships over transactions and which is underpinned by a forward-looking attitude that sees a low carbon future as inevitable.

• Innovation and collaboration by empowered bank employees is essential if a bank is to accelerate the transition to a low carbon economy and secure the successful clients of the future.

• Measuring the financial risks stemming from climate change will enhance a bank’s appetite to support clients aligned with a low carbon economy.

This body of work was based on 100 interviews, including 88 with senior bankers in Europe, Asia and the Americas.

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