Only two of 400 major financial institutions have credible fossil fuel phaseout commitments, finds the latest Financial System Climate Assessment from the non-profit World Benchmarking Alliance.
For transition plans to be credible, they must include short-term financing for low-carbon activities, with clear metrics to reach targets in line with keeping global warming below 1.5C, says the report.
The analysis, which covers the world’s largest banks, insurers, asset managers and development finance institutions, finds that only 47 institutions have integrated at least one short-term, clear financing target.
A total of 149 institutions have plans that cover at least some financial transition activities, while an additional 49 have goals that only deal with their own operations. Some 103 institutions disclosed their share of financing towards low-carbon activities, a figure that is unchanged since last year.
The researchers say banks surpass asset managers on clear financing targets, with 20 per cent of banks’ transition plans integrating a proper target, compared with less than 3 per cent of asset managers’ plans, 10 per cent of insurers and 7 per cent of pension funds.
No institution scored better than a D on the report’s letter-grade scale for capital allocation and financed emissions reductions.
The divide is also regional, with Europe and central Asia ahead of east Asia and North America, the authors say.
Citing the International Energy Agency, the report says $4.5tn of clean energy investment is required globally every year into the 2030s, relying on financial institutions to develop credible plans.
The WBA estimates that low-carbon finances represent an average of 2.7 per cent of total finances across the 400 institutions.
The full report can be read here.