A growing number of financial institutions are committing to align their financial services with the objectives of the Paris Agreement : for instance, through the signature of the Paris Accord for non-State actors, the Katowice commitment with several major banks such as BNP Paribas or Société Générale, the mention in the Principles for Responsible Banking or finally the Net Zero Asset Owner Alliance, which includes AXA and five other French actors. New initiatives have recently emerged, such as the Rocky Mountain Institute and its Center for Climate Aligned Finance, which has been joined by several major American banks.
This alignment of financial institutions with the Paris Agreement is necessary to regulate and redirect financial flows and ensure an effective response to the climate crisis, keeping the 1.5°C global warming limit as a goal. This limit was determined by the IPCC report in 2018, which gives several possible trajectories for dealing with climate change.
Unfortunately, the commitments of financial institutions today are empty: they are not followed by concrete actions. Announcements and words are no longer enough; concrete sector-specific policies must be implemented now in order to achieve the objectives by 2050.
Therefore, several NGOs, including Reclaim Finance, have drawn up principles for financial institutions to follow to ensure that their commitments are truly aligned with the Paris Agreement. These principles are articulated in two main points, which are then developed in several sub-parts:
- Financial institutions must adopt a commitment by COP26 that requires that the projects and companies they support are aligned with 1.5°C;
- The financial institutions must by COP26 have in place a process to measure and disclose their climate impact, and must make broad net-zero commitments to phase out financed emissions in alignment with 1.5°C, and be committed to a specific plan for establishing science based targets.
Now more than ever, it is time for financial institutions to adopt concrete and ambitious policies regarding their support for coal, oil and gas. For coal policies, our Coal Policy Tool is a good tool and indicator for financial actors: today, only 16 of them have a coal policy that is aligned with the Paris Agreement.