Only half of banks worldwide ready for climate risk reporting
31 Oct 2022 11:51am
Image for illustrative purposes only - sinar archive
The report, compiled by Avanade, a Microsoft solutions provider, and EFMA, a global non-profit organisation created by banks and insurers in 1971 to help them make the right decisions, also found that many banks are not on course to meet their environmental, social and governance (ESG) goals.
Avanade and EFMA had conducted online research between November 2021 and February 2022 covering 51 respondents from 25 countries. EFMA also conducted in-depth interviews with executives from Maybank, ABN AMRO, Banorte, BBVA, Caixabank, Desjardins, Deutsche Bank, ING, Novobanco and Standard Chartered Bank.
Entitled "Taking sustainability seriously: Are banks ready?”, the report had highlighted how banks and financial institutions are under increasing regulatory pressure to track and monitor their ESG progress.
Both Avanade and EFMA found that only half of banks (53 per cent) will be ready for regulatory reporting in the next six months, whereas almost one in five (18 per cent) are still unclear as to what the requirements are and almost one third (29 per cent) will not be ready for at least another year.
"Over half of banks (57 per cent) admit they will not hit net carbon zero operations until 2025. Only 15 per cent stated they had already achieved this position while just over a quarter (26 per cent) said they will be carbon neutral in the next 12-24 months,” the report said.
Only one in four have a climate risk model ready now while a third (34 per cent) plan to be in that position in six months.
The rest (42 per cent) will not be able to test the impact of various climate scenarios for at least a year, with 12 per cent having to wait two years.
The report said the majority of banks (70 per cent) saw their ESG work as having the most benefit on their market reputation and credibility followed by balance sheet protection (50 per cent). Other benefits were attracting younger groups of consumers, such as Millennials and Gen Y/Z (44 per cent) and better energy and waste management (34 per cent).
Avanade and EFMA also found that increasing ESG investment options to attract younger customers is now the top priority for banks (42 per cent), followed by greater transparency on the transition to a low carbon footprint (36 per cent), fuller disclosure and reporting (34 pct) and a greener product portfolio (32 per cent).
Varun Kumar, Avanade’s Southeast Asia financial services client group lead, said banks have a unique opportunity to lead in the world’s sustainability efforts and be a force for change but they need to move early to get benefits from the first-mover advantage.
John Berry, CEO of EFMA, said banks are now looking at how they can enact sustainable change and banking leaders do not view sustainability as a challenge, but a major opportunity - probably the biggest one over the next decade. - BERNAMA
