Banks with weak climate plans face legal risks

Failure to comply with the commitments exposes the sector to accusations of image greenwashing, or greenwashingABE noted on Thursday in its quarterly risk assessment.

The warning comes amid a crackdown on the asset management industry that has led to more than $140 billion in funds being downgraded from the EU’s top-ranked environmental, social and governance investment category.

The largest banks in Europe, such as BNP Paribas, BBVA, Credit Suisse and Deutsche Bankcommitted to adjust their loan and investment portfolios to reach net zero emissions by 2050.

But given persistent investments in fossil fuels, lenders are facing increasing criticism. The United Nations they are among those demanding that governments take action.

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Europe’s banks appear to be ill-prepared for potential losses from the consequences of global warming, ABE said, echoing statements by the European Central Bank.

Lenders should make environmental risk assessments of their clients a routine part of the credit-granting process, global regulators said last month.

“Current policies in place around the world are projected to result in warming of approximately 2.7°C above pre-industrial levels, that is, well above the targets set in the Paris Agreement in 2015.”ABE noted. “Both physical and transition risks could result not only in economic losses, but also in stagnant assets and increased uncertainty related to valuations.”