Catalysing Climate Safe Bank Lending

Fundamental transformation of our economic system is an urgent necessity to prevent impending climate catastrophe and halt the growing injustice of economic equality. This isn’t going to happen through isolated innovations that address the negative consequences of these problems. It also requires root causes to be addressed and transformed to stop those consequences occurring in the first place.

That’s why our work with mainstream finance focuses on supporting the transformation of business as usual, through partnering with finance professionals and their institutions.

On 25 September 2019, we designed and delivered the Climate Safe Learning Lab with bankers leading the transition to low-carbon lending in North American and European institutions. The Climate Safe Learning Lab is an initiative of the Climate Safe Lending network, a collaborative working to align bank lending practices with a global temperature rise of less than 2°C, which the Lab has supported since 2017.

At the time of the first Learning Lab, senior bankers were in New York for the signing of the UN Principles for Responsible Banking and New York Climate Week. The day-long event was designed to complement other convenings taking place that week, most of which were focused on the technical aspects of delivering climate finance.

The Climate Safe Learning Lab created a unique and vital space for bankers to explore the intangible barriers they experience, beyond the technical design and delivery of climate finance strategies. A range of insights emerged from the day which are shared in this insights report.

Two key takeaways emerged from the day:

Climate transition is everybody’s job

The scale and speed of change required to avert climate catastrophe needs all bank lending to transition to low-carbon, not just a subset of it. Most participants were in sustainability, ESG and CSR roles, with some working in legal, risk and banking economics. While sustainability teams are seen as the ‘experts’ in climate finance, participants saw the main barrier to change as educating and gaining buy-in from internal stakeholders beyond their team.

Participants lamented that they risk being seen as alarmist within their institutions. They would rather be collaborating with allies who share their concern for the role of their industry in creating the future they will leave for the next generation. Sustainability must be part of corporate strategy, reporting directly to the CEO’s office – not a siloed area of work on the side. Risk officers and legal teams need to be on board, HR must deliver learning and development differently, and P&L owners need to adopt a new mindset. In future Learning Labs, we’ll seek attendance from as wide a mix of bank roles as possible.

The soft stuff is the hard stuff

It is the human, behavioural factors which present the biggest challenges for leaders seeking to embed climate finance. Many participants perceived these challenges to be even greater than the technical barriers like a lack of data or investment-ready technology. Influencing decision makers, finding allies, navigating internal channels and power relationships, shifting mindsets – these are the behavioural, cultural and leadership challenges that will determine the success or failure of efforts to transform banking. These insights reinforce the emerging findings of the ClimateWorks Foundation and research by Yunus Social Business  – it is the human barriers that most slow down the speed and scale of action required to adapt banking to a low-carbon world.

To build on these learnings, the Finance Innovation Lab will be delivering two more Climate Safe Learning Labs this year, in collaboration with the Climate Safe Lending Network ahead of COP26.

Read the insights from the inaugural event here and find out more about the Climate Safe Learning Lab here.