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The UN banking principles are welcome – but do they go far enough to stop climate destruction?

If the Principles for Responsible Banking are to live up to their name, they must not allow banks to profit from climate breakdown.

Johan Frijns
21 September 2019
Image: sanjitbakshi, CC BY 2.0

With collective assets totalling $47 trillion, 130 banks, including a range of major international players, will sign up to the UN Principles for Responsible Banking at an official launch in New York this coming Sunday.

Aspirational initiatives for the banking industry such as these latest principles have a habit of cropping up every few years. They also have a habit of not bringing about discernible positive change – either within the banking sector or, more widely, in society.

So what should the Principles for Responsible Banking signatory banks be committing to in order to make good on this ambitiously-monikered framework which has been developed under the stewardship of the UN’s Environmental Programme Finance Initiative (UNEP FI)? Beyond the edgy, right-on ad campaigns which continually gush from their PR departments, how are banks now planning to shake off their lack of responsibility towards – if not consistent abuse of – society, the world’s climate and human rights?

That the time is absolutely ripe for responsible banking principles has never been more grimly evoked than by the thousands of fires raging in the Brazilian Amazon this summer. Behind the barbaric images which have shocked the world and led to several Amazonian regions declaring a state of emergency, bank finance for agribusiness has played a key role in the devastation of the land of indigenous peoples and the huge release of carbon dioxide which has resulted from the blazes.

An analysis earlier this year from Amazon Watch identified billions of dollars in credit lines which have gone in recent years to some of the agribusiness giants benefiting from the torching of the Amazon; many fires were set in order to clear the rainforest for agribusiness. Banks such as Santander, Barclays, BNP Paribas, Citi, Crédit Agricole and ING, each of them Principles for Responsible Banking founding banks or signatories, have had significant involvement in this financing.

When they step up to sign their respective bank’s commitment to the principles in New York on Sunday, will the CEOs of these institutions also be willing to commit to a ‘No Deforestation’ policy which sends a direct message to clients complicit in Brazil’s – and the world’s – social and environmental firestorm?

Signs indicate that the answer is almost certainly a no. This is despite the acute urgency now required to address such flagrant abuses and, also, despite what the banks involved are supposed to be signing up to.

The six cornerstones of the Principles for Responsible Banking require signatory banks to:

  • align their business strategies with the UN’s 17 Sustainable Development Goals and the Paris Climate Agreement, which aims to limit the global temperature rise to well below 2 degrees Celsius above pre-industrial levels;
  • do more to have a positive impact on people and the environment and do less that has a negative impact;
  • encourage clients to behave sustainably;
  • work with stakeholders for the good of society;
  • set targets and establish governance structures to ensure the principles are met, and;
  • be transparent and accountable in presenting how implementation of the principles is proceeding.

This may sound impressive, if a little vague. But the further we’ve looked into the principles, and the longer we’ve waited for tangible commitments to materialise from signatory banks in the run-up to the launch, the more our misgivings about them have grown.

The Principles for Responsible Banking framework rests on the setting of targets. For this signatory banks will largely be left to their own devices, though oversight and guidance will be provided by UNEP FI. Such latitude brings certain risks as well as opportunities for banks to step up with positive and meaningful commitments.

Yet, under the framework’s implementation guidelines, the 130 banks lining up for Sunday’s publicity-boosting launch event have two years to produce and publish these targets, with a further two years to act on whatever they decide to pledge, potentially up to 2023. This kind of implementation timeframe is regrettably inadequate given the urgency of the issues which the overall framework is purportedly setting out to tackle.

UN Secretary-General António Guterres recently described the climate emergency as a “battle for our lives”, and it is very welcome to see the integration and alignment of signatory banks with the Paris climate goals featuring so prominently in the new framework. The problem is that real climate action at the banks, unfettered by financing which boosts carbon emissions, is again being deferred by these new principles precisely when deep-rooted commitments are urgently needed – by 2020, Secretary-General Guterres has said, the construction of new coal-fired plants has to end globally.

While a number of the big banks which will attend the New York launch have committed in the last few years to stop directly pouring billions of dollars into new coal plant projects, they are nonetheless still prepared to both provide general financing and help raise capital for companies pursuing the expansion of the world’s coal plant fleet to the detriment of public health and the climate.

These institutions, many of which eagerly signed up to the Paris Pledge for Action back in 2015, have by and large been making scant progress in rowing back their dirty energy financing over the last four years as the climate emergency has intensified.

Our research shows that in the three years following the signing of the Paris agreement, 16 of the so far announced Principles for Responsible Banking institutions – including Barclays, BNP Paribas, Citi, MUFG and the Industrial and Commercial Bank of China – provided coal, oil and gas companies with over $680 billion in financial support. UBS, another signatory bank, has assessed that the potential costs to the insurance industry from Hurricane Dorian, which battered the Bahamas in early September claiming 50 lives, are $25 billion. The same Swiss bank, coincidentally, financed the fossil fuel industry to the tune of $25 billion between 2016 and 2018.

Climate disruption and devastation is happening now, and it is happening to all of us. The death tolls and the costs are mounting while the world’s big banks continue to view dirty energy as a good bet. ‘Responsible banking’, in the eyes of most people, is by definition a contradiction in terms, a sentiment which has understandably only deepened in public consciousness during the prolonged aftermath of the 2008 financial crash.

If the Principles for Responsible Banking are to live up to their name in this moment of climate emergency, we should be seeing them induce commitments from banks to – right now – end their support for companies and projects seeking to expand the use of fossil fuels. The UN Climate Summit next year will review the emissions reduction pledges made by countries in 2015 – let’s see big banks bolstering global momentum in the run-up to the Glasgow summit by pledging to stop bankrolling fossil fuel expansion and even more emissions from coal, oil and gas.

Instead, however, there is the real risk that this latest framework will succeed in buying banks a bit more time to profit from devastation.

At the soft launch of the principles in Paris last November, the Financial Times reported how an unnamed bank boss, the head of one of the signatory institutions no less, viewed these kind of sectoral guidelines as “bullshit”. If little more than business as usual results from the Principles for Responsible Banking, it will fall to the rapidly growing global climate movement to “call bullshit” on banks which refuse to stop financing climate breakdown.

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