Banks made big climate promises. A new study doubts they work

Illuminem summarizes for you the essential news of the day. Read the full piece on New York Times or enjoy below:

🗞️ Driving the news: A study analyzing European Central Bank lending data has questioned the effectiveness of banks' voluntary climate commitments made during the COP26 climate conference, suggesting no significant reduction in emissions from the finance sector

🔭 The context: Banks and financial institutions had pledged to steer $130 trillion towards reducing carbon emissions and supporting the energy transition as part of the Glasgow Financial Alliance for Net Zero
• However, the study found that the lending patterns to targeted sectors like oil, gas, and transport did not differ significantly between banks that had made climate commitments and those that hadn't

🌍 Why it matters for the planet: Despite these voluntary commitments, the research indicates that there has not been a significant shift in financing away from high-carbon sectors
• This stagnation challenges the global efforts to limit climate change and transition towards greener energy sources

⏭️What's next: The effectiveness of the Glasgow Financial Alliance for Net Zero and similar initiatives remains under scrutiny as they face challenges in implementing stringent measures for reducing financed emissions
• The findings call for a reassessment of strategies to ensure financial institutions can effectively contribute to climate goals

💬 One quote: “It’s not OK for the net-zero bank to act exactly like the non-net-zero bank, because we need that to scale up financing,” said Parinitha Sastry, an assistant professor of finance at Columbia Business School

📈 One stat: Despite their climate pledges, the study highlighted that banks reduced lending by 20% to high-carbon sectors since 2018, a rate comparable to banks without such commitments

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