Breaking Property News 17/09/24
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Ranking of 50 of the world’s largest commercial banks assessing their maturity in climate adaptation reveals most are underperforming
Most of the largest commercial banks in the world are lagging behind in implementing effective measures to climate-proof their operations and those of the businesses they finance, according to a new ranking which assesses how well banks are responding to escalating climate risks. Despite growing awareness of climate adaptation, the ranking reveals that only seven of the world’s top 50 banks are meeting more than half of the climate adaptation criteria, and none meet all of them.
The Top 50 Banks in the World Tackling Adaptation (2024) report from Climate X (a leader in climate risk data analytics) in collaboration with Climate Proof found that European and UK banks performed relatively better than their counterparts in the US, Canada, and Australia, driven by stricter climate policies and frameworks in the region. The leading institutions in the ranking include Standard Chartered, Banco Santander, and UniCredit, all of which demonstrated more advanced engagement with climate adaptation strategies.
Top ranked global banks by climate adaptation maturity:
- Standard Chartered PLC (UK)
- Banco Santander SA (Spain)
- Banco Bilbao Vizcaya Argentaria SA (Spain)
- UniCredit SpA (Italy)
- Sberbank of Russia (Russia)
Lowest ranked global banks by climate adaptation maturity:
- Japan Post Bank (Japan)
- Morgan Stanley (US)
- Goldman Sachs Group Inc. (US)
- Capital One Financial Corp (US)
- U.S. Bancorp (US)
Link to the full ranking of the top 50 banks by climate adaptation maturity (here)
“The ranking comes at a critical time when climate change is having a profound impact on the global economy”, said Lukky Ahmed, CEO of Climate X. “From extreme weather events to longer-term environmental shifts like rising sea levels and biodiversity loss, the business landscape is being transformed, and the banks that finance these businesses must adapt to a rapidly changing world. Despite the growing urgency, the study shows a significant gap in how banks address climate adaptation.”
“Climate adaptation is no longer a choice for the financial sector – it’s a necessity,” continued Ahmed. “Our ranking demonstrates that while some banks are beginning to take steps to prepare for a hotter, more volatile world, the majority have a long way to go. It is vital that banks incorporate adaptation into their strategic decision-making processes and develop products and services that support resilience.”
Methodology: The ranking was conducted using a unique methodology designed to evaluate the adaptation maturity of banks through 17 qualitative indicators. These indicators were grouped into three categories:
- Think: Strategic alignment and assessment of physical climate risks
- Do: Implementation of adaptation measures and strategies
- Track: Monitoring, reporting, and transparency of adaptation actions
To assess each bank’s maturity, Climate X analysed the most recent public disclosures from each institution, focusing primarily on their annual reports. A Large Language Model (LLM) was employed to determine how well the banks aligned with the indicators, offering a high-level view of their preparedness for climate adaptation challenges.
“The methodology we used gives a comprehensive picture of how these banks are progressing in their adaptation efforts,” said Kamil Kluza, COO of Climate X. “However, it also reveals significant gaps in transparency and action. Most banks are not setting adaptation impact metrics, and few have clear lending strategies that support communities and businesses hit by climate-related disasters.”
As climate risks intensify, the role of banks in financing resilience and adaptation is becoming increasingly important. While mitigation efforts have historically received the majority of attention – particularly regarding the reduction of carbon footprints – adaptation is crucial to protect the economy from the inevitable impacts of climate change. The report underscores the need for banks to take on a leadership role in driving adaptation financing, particularly as the economic costs of climate inaction rise.
The ranking also points to regional disparities in adaptation engagement. European and UK banks, influenced by more stringent regulatory frameworks, performed better on average than their counterparts in North America and Australia. However, even the highest-ranked banks have significant work to do to fully integrate climate adaptation into their operations.
Looking ahead, Climate X intends to refine its methodology and expand future assessments to capture an even broader scope of climate adaptation activities. As the theme of climate adaptation evolves, so too must the efforts of the banking sector to ensure that economies worldwide are equipped to handle the challenges posed by a hotter, more uncertain future.
“With this inaugural annual ranking, we hope to shine a light on the gaps in the financial sector’s preparedness for climate risks,” Ahmed added. “Our message to banks is clear: now is the time to act. The longer they wait, the more severe the consequences will be, not just for them, but for the entire economy.”
In addition to the Top 50 Banks in the World Tackling Climate Adaptation (2024) report, Climate X has published the Operation Manual, a comprehensive guide designed to help financial professionals identify, assess, and manage climate risks. Acting as a ‘bible’ for the industry, the manual summarises key characteristics of physical climate risks and their impact on banking, offering actionable tools and insights for building climate resilience. It provides essential learnings, with hyperlinks to more detailed resources, and equips financial institutions with the knowledge needed to close adaptation gaps.
For further information or media enquiries, please contact: research@climate-x.com
Founded in 2020, Climate X is a leading climate risk data analytics company, helping organisations better understand and respond to the impacts of climate change. Using advanced technology, Climate X provides insights into future climate risks through its platform, which creates digital twins of real-world assets. By analysing 500 trillion data points, the platform enables customers—including banks, mortgage lenders, and real estate firms—to assess and manage the risks climate change poses to their assets and business operations.
Andrew Stanton Executive Editor – moving property and proptech forward. PropTech-X
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