COP28: What’s in it for the banking sector?

On the one hand, after long hours of difficult negotiations, some major decisions have been made, such as exiting fossil fuels, tripling the renewable energy capacity, and doubling energy efficiency improvements by 2030. On the other hand, questions are being raised about the practical challenge of securing and scaling up the required investments and capital to support such commitments.

From the banks’ perspective, national transition strategies and sectoral pathways will represent key aspects of those commitments that financial institutions will have to take into consideration when identifying and assessing the related risks, impacts, and opportunities on their financing and investing activities.

For instance, in certain countries where renewable energy capacity is still limited, one can anticipate actions in that regard. Also, considering that greenhouse gas emissions will have to decrease by 43% by 2030 and 60% by 2035 – if not started yet – banks should measure the GHG intensity of their portfolio as well as identify and implement actions to improve the performance of their portfolios in line with net-zero transition and/or other science-based sustainability objectives or targets.

The LSFI has recently issued a useful report in that regard, and the ABBL is actively working with its members on the development of further material on transition plans that will be made available in 2024, so stay tuned.

A final key takeaway from COP28 for banks would be to scale up the efforts now while ensuring the integrity of their commitments, related actions, and communication.