The convening of October’s Climate Safe Learning Lab (CSLL) examined two key questions: ‘What is a credible climate transition for a bank?’ and ‘What are the barriers and enablers to achieving that transition?’
The CSLL regularly hosts convenings for its global community members: banking professionals actively influencing the climate agenda within their institutions. These convenings provide a safe peer-learning space to share thoughts and experiences with fellow bankers and experts on topics such as COP27, the climate transition and leadership. They focus on the deep cultural and systemic changes required for a truly sustainable finance system. The CSLL is collaborative, no price sensitive confidential information is shared, and participating bankers can choose to keep themselves and their institution completely anonymous.
October’s CSLL convening focused on credibility in the climate transition. This was the first peer learning convening of the new fellowship year: subsequent convenings in 2023 will aim to dip further into specific areas identified by participants.
A Changing Map
Many banks are setting targets for net zero and to reduce financed emissions, their goal being to keep their lending aligned to a 1.5 degree pathway for global warming by 2100.
Generally, bankers are used to dealing with financial models and spreadsheets with linear equations. This is akin to walking through a forest with a map from point A to point B, with a direct, clearly marked path to follow. However, the climate transition is not linear and is subject to uncertainty. Government policies, carbon budgets, balance sheets and corporate clients’ actions will change along a net zero pathway.
Therefore, institutions trying to move from point A to point B are doing so with an approximate map that changes as they walk. Being realistic about a bank’s progress and accepting there could be multiple indirect routes to its end goal, potentially with some dead ends along the way, is important for producing credible plans.
Barriers and enablers
During the convening bankers were asked to use a tree framework to consider the barriers and enablers to a credible climate transition. Leaves are defined as the ‘strategy’ layer and include data, tools and financial products. The tree branches are the organisational ‘structures’, such as sustainability committees and new product approval processes. The trunk is interpersonal ‘relationships’, such as between a client and banker. The roots are the deeply held beliefs and ‘mindset’. This tree framework is based on research called ‘The Water of Systems Change’ – visual graphics of the model are available online.
Using this framework, there were some barriers and enablers the bankers identified frequently:
- Leaves – ‘strategy’: New disclosure requirements were identified as a barrier, as they are time-consuming to prepare for and they may detract from work with clients transitioning towards low-carbon. Enablers largely focused on new financial incentives, e.g. tax relief.
- Branches – ‘organisational’: Sustainability regulations were identified as both a barrier and enabler. Participants recognised the vital role of mandatory regulations to move sustainability into mainstream finance. However, they worried about competing priorities at a time of market uncertainty.
- Trunk – ‘relationships’: Participants identified the lack of a positive ‘tone from the top’ as a barrier. On the flipside, open, honest communication from leaders about sustainability was seen as a vital enabler. Participants also identified sustainability training for all employees as an enabler.
- Roots – ‘mindset’: Much of the session focused on personal reflections. Personal views about politics and the economy could be both a barrier and an enabler within banks. One banker asked: would senior leaders in the bank be in a position to openly question their own behaviour and express vulnerability? Are diverse views, including those from people and companies most impacted negatively by climate change, welcome in a bank’s boardroom to share their stories? There were also concerns about sustainability being viewed solely through the lens of profit maximisation.
The next CSLL peer learning convenings in 2023 will dive deeper into some of these topics with participants.
Healthy trees require nourishment from the soil they grow in (and trees are a staple ingredient for a credible climate transition). Working on climate in a bank requires resilience and determination. It can feel tense and overwhelming with multiple competing demands from colleagues, investors, regulators, initiatives and NGOs.
To avoid burnout, bankers highlighted the importance of spending time in nature, and with friends and family. Some bankers said: for motivation, it was key to keep in mind the overall goal of a low-carbon, net zero-aligned economy, which ultimately is the purpose of climate transition work for banks, their customers, regulators and civil society. Participants also reflected on how to be more sustainable in their own personal lives and how this may link to their profession.
To conclude, for banks it is necessary to deal with technical details such as climate data and new sustainability reporting requirements. However, it is also essential to see the bigger picture and to be internally aligned on the direction of travel – keeping the planet within 1.5 degrees of warming and protecting it for future generations. As the saying goes, ‘Don’t miss the wood for the trees’.
The next CSLL peer learning convening will be held in early 2023. Further information about joining the community can be found here. In addition, each year a group of bankers are recruited to join the CSL Fellowship. Bankers globally in any role are invited to find out more and apply here.