Investor advisory firm ShareAction has accused banks of "guaranteeing catastrophe" by supporting industries that produce greenhouse gases and said institutional investors are failing in their duty to make them alter course.
Some banks are engaging with institutional investors who want lenders to act to help reduce carbon emissions, said Catherine Howarth, ShareAction's CEO. However, institutional investors are not holding banks to account on the issue, and investors are failing to hold banks to account, just as they had over other key issues in the run-up to the financial crisis, she said.
"Climate change is an absolute return issue, not a relative one, and at a global level the strategy of banks is guaranteeing climate catastrophe," Howarth told an audience of bankers at the FT Banking Summit in London on Dec. 4.
Howarth urged bank shareholders to measure their investment policies against the EU's goal of bringing its greenhouse gas emissions to net zero by 2050, and said on that measure their response to climate change was too slow.
"We are nowhere near meeting that goal," she said.
At the conference earlier, Bunny McDiarmid, executive director of Greenpeace International, said Barclays PLC was the only U.K. bank still funding tar-sands oil projects. She said 136,000 people had contacted Barclays protesting against its involvement, 30,000 of whom were customers and 6,000 of whom said they would leave the bank as a result. As of Dec. 7, the total number of signatures on Greenpeace's petition against the British bank had reached almost 145,000.
Howarth also cited Mark Carney, governor of the Bank of England, who has warned that investors in the businesses producing carbon emissions risk being left with "stranded assets" with investors facing "potentially huge" losses.
She said institutional investors entrusted by millions of people to invest their money wisely had a duty to raise issues such as climate change with banks since it posed a systemic risk for the financial system as a whole and an institutional risk for banks.
For investors, Sacha Sadan, director of corporate governance at Legal & General Assurance Society Ltd., said banks had responded to pressure from institutional investors to change their ways and were not failing in their duty on big issues such as climate change.
"On climate change, it's new, it's not easy for banks. But banks like BNP Paribas SA, HSBC Holdings PLC and Standard Chartered PLC have said they are not going to invest in coal-fired power stations. So it is being done today — it's the same with green finance; we want to invest in low-carbon areas and it is starting to happen," he said.
"If you are a large bank operating in Asia, and think climate change could affect GDP growth you have to start thinking about that now. Are you going to get paid back on a coal-fired power station in 20 years' time? It's debatable."
Fiona Reynolds, the CEO of another shareholder action group, Principles for Responsible Investment, said 10 years after the financial crisis banks were continuing to fail the public and institutional investors were not holding them to account.
She quoted Kenneth Haynes, head of Australia's Financial Services Royal Commission, which released an interim report in September that castigated the banking industry. Haynes said banks had gone "to the edge of what is permitted and too often beyond that limit, in pursuit of profit."