Why banks (don't) keep their net-zero promises: A reality check

Since the adoption of the Paris Agreement that anchored the alignment of finance flows with low greenhouse gas emissions as one of its objectives, a groundswell of banks have publicly committed to reaching net-zero greenhouse gas emissions across their lending and investment portfolios by 2050. This development spurred hope about the finance sector leveraging its global power to accelerate decarbonization efforts worldwide, but uncertainties prevail around the actual mitigation outcomes that can be expected from banks’ efforts to implement net-zero targets.

To address this issue a study by Mischa Aeschlimann examined the practical opportunities to operationalize voluntary climate pledges in Swiss mortgage-lending practices and their likelihood of implementation through an extensive stakeholder consultation. "Although banks have measures at their disposal to reach pledged climate targets, implementation is hindered by banks fearing to experiencing market disadvantages should competitors fail to follow suit," states Aeschlimann. "Absent regulatory backing, banks efforts to pursue net-zero targets will be limited to measures with anticipated limited to negligible impact on decarbonizing financed housing stock, presenting the high risk that the public and policymakers currently overestimate the potential impact of banks’ voluntary climate pledges on emission reduction efforts."