Daily ESG Briefing: Progress on tackling climate risk ‘not consistent’ across banks, says BoE regulatory arm

The latest developments in sustainable finance

The Bank of England’s regulatory arm, the Prudential Regulation Authority (PRA), has warned banks’ progress on addressing financial risks arising from climate change is inconsistent. “Some firms have made good progress in embedding the PRA’s supervisory expectations, but progress has not been consistent across all firms, with further work required by many to meet those expectations,” the PRA said in a recent letter to CEOs of banks operating in the UK. It added climate risk remains a key PRA priority and that from this year “we will incorporate supervision of climate-related financial risks into our core supervisory approach”. The letter added: “The PRA will pay particular attention to how firms quantify climate-related risks and incorporate those risks into business strategies, decision-making, and risk-taking. Furthermore, we will keep a range of supervisory tools under review for use where we deem progress to be insufficient.”   

Ceres has called on the US government to strengthen its federal procurement process by requiring major suppliers to demonstrate a commitment to Paris climate targets, including annually disclosing GHG emissions and having a science-based plan for reducing those emissions to Net Zero by 2050 or sooner. In response to a government draft on regulations revising the procurement process to factor in sustainability in government purchasing, Ceres made recommendations including introducing a new competitive bidding process focused on zero-carbon products and using federal grants and loans to reduce GHG emissions through the procurement programme.  

The Investor Forum, the UK’s investor-corporate engagement body with 56 members with just over £800bn invested in UK equities, has outlined the engagement activities it undertook in 2021. It engaged with six companies including BT Group, HSBC and Kingspan, and had meetings to “enhance dialogues” with nine companies, including Barclays, BHP, HSBC and Unilever on climate issues and GSK, Boohoo and Kingspan on governance issues. Its 2021 review said a rising number of investors are using their voting rights on climate, diversity and employee rights issues and that going forward, stewardship must deliver “real-world outcomes”.   

After last year’s landmark court victory against Shell the Dutch wing of Friends of the Earth is calling on 30 major companies and organisations – including investors – to publish plans for cutting emissions. In letters targeting, for example, pension funds ABP, PFZW and financial institutions including ING, NN Group, Rabobank, Aegon and ABN Amro, as well as companies including ExxonMobil and BP, the NGO  asks the organisations to provide plans outlining how they will reduce emissions by 45% from 2019 levels by 2030. Milieudefensie set a three-month deadline until April 15 for the companies to present a climate plan.   

The Climate Science Network has published a research report aiming to enhance the legal community’s understanding of greenwashing litigations. The report analysis previous greenwashing cases and how commitments like ‘climate neutrality’ often lack methodology. The report offers practical recommendations for various actors in the context of greenwashing, including NGOs, policymakers and lawyers.  

The University of Cambridge Institute for Sustainability Leadership (CISL) and UNEP FI have published two reports aiming to help financial institutions to implement the TCFD framework.