New guidance gives banks framework for climate finance

Ceres released new recommendations for the U.S. banking sector, highlighting areas of improvement in the design and implementation of their climate finance target-setting and disclosures. Policies like the U.S. Inflation Reduction Act have spurred trillions of dollars in green financing opportunities, yet there is no consistent methodology for investors or regulators to compare U.S. bank performance.  

In a new report, Ahead or Behind? The State of Climate Finance in the Banking Sector, Ceres provides a set of recommendations on how banks can design effective climate finance targets and frameworks, enhance their disclosures for investors, and learn best practices from their peers. The core recommendations include: 

• Setting targets and offering climate-linked products and services

• Focusing on the added impact banks’ actions can provide

• Using consistent accounting methodologies across the bank’s metrics and targets

• Articulating clear eligibility criteria for sustainable finance activities

• Improving the consistency and decision usefulness of information shared in disclosures

• Aligning with international disclosure standards and frameworks

• Working with other banks to develop voluntary disclosure standards   

U.S. banks have committed trillions of dollars to climate finance, but investors and consumers cannot compare banks on these commitments,” said Holly Li, co-author of the report and Net Zero Program Director, Ceres Accelerator for Sustainable Capital Markets. "Our report provides a critical roadmap for banks to demonstrate real impact and additionality in their climate finance efforts so they can measure and show their progress in meaningful ways"  

The global shift towards a low-carbon economy has unlocked trillions of dollars in investment opportunities for banks. In 2023, green financing generated around $3 billion in fees, surpassing those earned from issuing fossil fuel debt for the second year in a row. Since the passage of the Inflation Reduction Act around $270 billion in new capital investments have been announced in American solar, wind, and battery storage projects.

The transition to a low-carbon economy represents risks and massive opportunities for U.S. banks" said Blair Bateson, co-author and Director of the Company Network, Financial Services at Ceres. "The banks that can differentiate themselves through credible, ambitious climate finance strategies will be best positioned to thrive in the clean energy economy in the coming decade" 

Ceres guidance supports the work of Ambition 2030, an initiative focused on decarbonizing the six highest-emitting sectors of the economy, including the banking sector. Ceres has released a series of reports detailing the climate-related risk and opportunities for banks, including Sustainable Finance Opportunities: A Guide for Financial Institutions, The Responsible Policy Engagement Benchmarking for Banks, Net Zero Standards for American Banks, US Banks and the road to Net Zero, and specialty reports on banks’ physical risk, transition risk, and derivative-related climate risk.    

About the Ceres Accelerator for Sustainable Capital Markets   

The Ceres Accelerator for Sustainable Capital Markets is a center within Ceres that aims to transform the practices and policies that govern capital markets by engaging federal and state regulators, financial institutions, investors, and corporate boards to act on climate change as a systemic financial risk. For more information, visit ceres.org/accelerator.