Germany's banks largely unprepared for climate risks – NGO
Clean Energy Wire
Most banks in Germany lack proper preparation to cope with risks stemming from climate change and will have a hard time adapting to looming disruptions from global warming and emissions reduction policies, environmental group WWF Germany has found in a rating of the country's 14 largest banks. "The results of our first WWF bank rating are sobering. Given the urgency of action, Germany's large banks are far away from a systematic integration of sustainability into their business," said WWF's sustainable finance expert Matthias Kopp. Climate risks for the finance industry include the potential loss in value of existing assets due to extreme weather events or changing consumption and investment patterns as economies around the world shift toward climate-neutrality. According to Kopp, sustainability strategies need to be promoted in all of the banks' workings, "from management to product design." The WWF's ranking found that German banks lack systems to detect and control climate risks and are not participating in setting up international standards, such as the Based Target-Initiative or the 2 Degrees Investing Initiative. "By implication, existing standards and methods to detect climate risks are not being implemented," Kopp said, warning that forthcoming regulations to enforce sustainability standards spell trouble for banks that are insufficiently prepared. Banks face upcoming challenges like mandatory sustainability counselling for customers by 2021 and setting up databases that make the environmental impact of funded projects more transparent, WWF says.
In recent years, the German banking sector has become more aware of the potential risks from climate change and the potential losses to their fossil assets due to climate policies, as evidenced by several industry initiatives aimed at forming a coherent stance on sustainable finance regulation. However, the sector is still having trouble revamping its approach, as companies struggle to define desirable investments and worry about restrictive regulations.