Out of sight, out of line: banks’ climate solutions financing plans lack both ambition and visibility

“You don’t plan to fail”, the adage goes, “you fail to plan”. The underlying message, that fine-tuned roadmaps are worth the resources they demand, is particularly applicable in the context of the banking sector’s approach to the energy transition.

The banking sector’s progress on financing climate solutions appears to be stagnating. Partly, that reflects a lack of progress on underlying targets and disclosures. That is according to new research published by the Transition Pathway Initiative’s Global Climate Transition Centre (TPI Centre).

The TPI, an asset owner-led initiative, is supported by 156 investors globally, representing approximately US$87 trillion between them. Its latest State of the Banking Transition 2025 covers 36 of the world’s largest banks (by market capitalisation and total assets).

Findings from the report shed light on where the banking sector’s transition is at and where it is headed.

Financing ratios

The report’s findings have a lot to do with their context. Notably, the NZBA’s decision to cease operations is shaping the agenda for the banking sector’s approach to the energy transition.

The report also comes a few months after a banking sector proxy season filled with calls for visibility over a bank’s climate solutions financing relative to fossil fuels.

At the Llyods Bank AGM, the Church of England Pensions Board called for full exit from oil and gas expansion. The New York City Retirement Systems called on Bank of America to disclose the bank’s energy supply ratio.

Similar demands for visibility by asset owners were echoed at AGMs at Standard Chartered and Royal Bank of Canada.

For these asset owners, TPI’s report tells a grim tale. The research assessed how many banks quantified their climate solutions financing targets through lending ratios. 35 of the 36 banks did not do so.

“The basis of this sub-indicator is to assess the ambition of the climate financing targets that banks are setting. To do that, the target needs to be set on a clearly defined business activity of the bank. Thus, we can assess what share of the bank’s financing portfolio is specifically dedicated to climate solutions”, explains Ákos Hajagos-Tóth, a policy officer at the TPI Centre and one of the report’s co-authors.

“BNP Paribas, the only bank that scores on this sub-indicator, has a target to increase the share of low-carbon energy, primarily renewables, in the bank’s financed energy mix to 66% by 2025 and 90% by 2030 while stating that the exposure to low-carbon energy must reach at least EUR 40 billion by 2030. This target also has a close link with the bank’s sectoral targets for the energy sector”, he told Net Zero Investor.

Hajagos-Tóth notes that while most banks have set climate solutions financing targets, their ambition is harder to assess given their broad scope – they tend to be multi-sectoral and spread across a range of business activities.

Climate tilt

Assessing a bank’s climate tilt is a complex task. For one, a bank’s climate tilt has several components- from direct lending and investment to advisory and treasury services.

To focus on one of the pieces of the puzzle, the report’s authors investigated whether a bank disclosed its total share of finance directed towards climate solutions last year. None of the 36 banks had done so and only 50% had estimated the real economy impact their targets would have.

“Given the wide range of business activities included in climate solutions financing targets, it is challenging to estimate the materiality of financing targets, and no bank clearly discloses the share of total finance directed towards climate solutions”, said Hajagos-Tóth.

“To echo the report, even legislated disclosures fail to give a full picture of banks’ financing of climate solutions”, he adds.

If this year’s proxy season is anything to go by, that full picture is something investors value. Just a few months ago, asset owners called on banks to deliver not only ambition but also granular clarity.

As readers of TPI’s new report, they will now find themselves in possession of information they might choose to act on. How and when that happens, time will tell.