Taking the Carbon Out of Credit Report

Aligning funding from lending institutions with the transition to a net-zero carbon economy in a timescale that helps us avoid the most severe destruction from climate change requires rapid progress across the whole financial sector. Taking the Carbon Out of Credit is a report published by the Climate Safe Lending Network in July 2020 that sets out an integrated mechanism, along with practical tools, for banking institutions that commit to demonstrating leadership in addressing climate change.         

Report highlights:

·      Broadening risk management to encompass systemic as well as financial risks.

·      Assessing impact and setting targets using the Three Horizons Approach to Climate Safe Lending.

·      A Climate Safe Lending Decarbonization Toolkit that includes 10 interventions for helping banks make a positive difference.

·      What it means to be a Triple-A Bank of the Future. 

Three Horizons Model for Climate Safe Lending

Now is the time for banks, together with their boards and stakeholders, to set public targets and report on how they are reducing climate emissions through their activities and relationships with clients.

Three Horizons is an iterative approach to climate safe lending in which the process of target setting serves to mobilize activities along a pathway from stopping finance flows to fossil fuels, to decarbonizing balance sheets and financing innovative solutions, such as the sequestration of carbon emissions.

Climate Safe Lending Decarbonization Toolkit

As primary funders of the real economy, banks have significant influence with their business clients as well as in the development of macro-economic or fiscal policies that drive markets.

The Climate Safe Lending Decarbonization Toolkit consists of 10 practical actions lending institutions can take to accelerate the transition to a net-zero carbon economy.

Which of these tools is your organization using to move along the climate safe lending pathway? 

Are there other tools that you would like to see included in the Climate Safe Lending Toolkit?

Triple-A Bank of the Future

What might a rating system for banks look like that evaluates risk on a more systemic, longer-term forward looking and environmentally inclusive basis? From the perspective of climate safety, sustainability and resilience, banks are rated Triple-A if they:

• ANTICIPATE RISK: Base assessments of clients not just on risks that have occurred in the past, but on learning from the emerging future and adapting their policies.

• ADD VALUE: Banks will need to decarbonize and optimize the social, economic and economic value this produces for their clients.

•   ACT NOW: Align business strategy with positive environmental impact. Direct entrepreneurial efforts towards addressing climate change with an urgency comensurate to the challlenge.