Green financing, which refers to the provision of financial services and products that support environmentally sustainable projects and initiatives, has surged to more than $1.1 trillion at top banks around the world, according to a new report by Corporate Knights.
Vancity leads the way in green financing
The report, which ranks 400 banks based on their green financing performance, found that Vancouver-based Vancity was the top performer for the second year in a row, with 28.6% of its total assets allocated to green financing. Vancity, which is Canada’s largest community credit union, has been a pioneer in supporting renewable energy, energy efficiency, green transportation, sustainable agriculture, and social housing projects.
Vancity’s CEO Christine Bergeron said that green financing is not only good for the environment, but also good for business. “We believe that by investing in the transition to a low-carbon economy, we are creating value for our members and our communities, as well as reducing our exposure to climate-related risks,” she said.
European banks dominate the top 10
The report also revealed that European banks dominated the top 10 list of green financiers, with seven banks from France, Germany, Sweden, and the Netherlands. The report attributed this to the strong regulatory and policy frameworks in Europe that encourage and incentivize green financing.
Among the European banks, Banque Populaire du Nord from France ranked second with 18.9% of its assets dedicated to green financing, followed by GLS Bank from Germany with 18.6%, and Ekobanken from Sweden with 17.8%. The other European banks in the top 10 were Triodos Bank from the Netherlands, Crédit Coopératif from France, and UmweltBank from Germany.
Asian and American banks lag behind
The report also showed that Asian and American banks lagged behind their European counterparts in terms of green financing. The highest-ranked Asian bank was DBS Bank from Singapore, which ranked 29th with 5.4% of its assets allocated to green financing. The highest-ranked American bank was Amalgamated Bank from the United States, which ranked 31st with 5.2% of its assets.
The report noted that Asian and American banks face more challenges in scaling up their green financing activities, such as the lack of clear definitions and standards for green finance, the lack of data and disclosure on environmental impacts and risks, and the lack of market demand and incentives for green finance.
The need for more green financing
The report highlighted the need for more green financing to support the global transition to a net-zero carbon economy by 2050, as envisioned by the Paris Agreement on climate change. The report estimated that the world needs to invest at least $3.5 trillion per year in green sectors such as renewable energy, energy efficiency, green transportation, sustainable agriculture, and circular economy.
The report also urged banks to align their green financing activities with the Sustainable Development Goals (SDGs), which are a set of 17 global goals that aim to end poverty, protect the planet, and ensure peace and prosperity for all by 2030. The report suggested that banks can use the SDGs as a framework to identify and measure their positive impacts on society and the environment.
The report concluded that green financing is not only a moral duty for banks, but also a strategic opportunity to create long-term value for their stakeholders and contribute to a more sustainable and resilient future for humanity.
