Can the world really accept warnings from financial houses like BlackRock and Blackstone that the corporate social responsibility management and environmental initiatives they have taken, including investment in the decarbonization of economic activity, are now under serious threat; The answer is no. Record increase in CO2 emissions in the world fossil fuel combustion in 2021, and their inflation, although lower, in 2022 does not follow the trajectory given by International Energy Agency (IEA) for the global energy sectori.e. achieve net zero emissions by 2050. Achieving zero emissions by 2050 requires significant funding to achieve nearly 50% electricity from low emission sources by 2025 and nearly 90% of renewable energy sources until 2050.

Sixth report of the United Nations Intergovernmental Commission on Changing of the climate (IPCC) estimates that by 2030, current funding flows are three to six times lower than the average annual need for investment in pollution mitigation.

For banks and for investors, the implications of the milestones on the International Energy Agency’s path to zero emissions, as well as the funding gaps identified in the IPCC report, are significant. They should not only lead to a multiple increase in financing for low-carbon energy supply, but also fundamentally change the approach to the energy sector. banks approaching real change. Unfortunately, the industry transformation data is not very encouraging. In terms of shifting the flow of funding away from fossil fuels, a recent study by BloombergNEF shows that the Global Index of Systemically Important Banks (GSIB) Energy Supply Banking, that is, the ratio of bank financing of low-polluting energy projects to fossil fuel banking, is 0.81 to one, when it should be four to one.

In terms of deeper changes in how lending institutions approach their business, it is notable that even among those aiming to bring their loan and investment portfolios to zero emissions by 2050 under the Zero Emissions Banking Alliance (NZBA) , energy banks supply ratio is 0.92 to one.

People don’t like being late. Some of the NZBA signatory banks are members of the Global Alliance for Value-Added Banking (GABV), a network of over 70 independent banks and associations that use financing to drive sustainable economic, social and environmental development. Collectively, they own more than $210 billion in combined assets. As banks with a common purpose, they responded to the events of the NZBA. GLS Bank in Germany decided to leave the NZBA in response to its bipartisan stance, while wealth manager Vanguard also pulled out of the Zero Emissions Asset Managers Initiative in December, saying it wants to “provide the clarity that investors want.”

Finally, Munich Re, the world’s largest reinsurer, suspended its participation in the Zero Emissions Insurance Alliance in March because “there is very little opportunity for insurance companies to achieve the zero emission goal without real antitrust risk.”

* Dr. Adriana Kosornik-Mina is Director of Research and Performance at the Global Securities Banking Alliance.