COP26 has been dubbed the ‘finance COP’ in recognition of the crucial role of the global financial industry in delivering on the goals of the Paris Climate Agreement. In a series of blogs in the lead-up to the conference, UNEP FI Head, Eric Usher assesses how financial institutions are integrating sustainability into their business strategies starting with some thoughts on the first collective reporting from the signatories to the Principles for Responsible Banking.

He will then cover the push-back financial institutions are seeing as they attempt to scale up their efforts, and just before COP he will share some thoughts on the net-zero alliances UNEP FI is convening and what UNEP FI believe makes for the most credible commitments in this fast-evolving space. As many of the current efforts being made by the finance community are voluntary, he will focus on how financial institutions are being held accountable for their ‘green’ actions. Time for financial institutions to put their cards on the table.


In September 2019, Antonio Guterres and CEOs representing 132 founding banks launched the UN Principles for Responsible Banking. Two years have passed and last Thursday saw the release of the first biennial progress report from this community of ‘responsible’ banks, now 250 strong. Together they manage 40% of global banking assets and serve 1.6 billion people therefore this isn’t a little green club but rather a much wider industry mobilization.

The Principles for Responsible Banking are not so much a tool to manage Environmental, Social and Governance risks but rather a framework for aligning a banks’ business with societal objectives like the Sustainable Development Goals and the Paris Climate Agreement. Lofty ambitions.

So, how’s it really been going in practice? Well, two years in, we see some interesting developments but of course there is much more that needs to be done.  Starting from the top, signatories have mostly (94%) now identified sustainability as a strategic priority within their business strategy. Most (93%) are establishing systems to analyze the impact of their financing although this is understandably challenging. A lot more progress is needed here, including in developing impact assessment methodologies and closing the data gap, both internally and on the part of their clients.

Building on the impact assessment capability, the more advanced signatories are setting impact management targets (30%) – a core requirement for signatories of the Principles – and they are engaging with their clients on high priority issues, particularly climate change (87%) and financial inclusion (47%). On climate change-related issues such as fossil-fuel exposures, they’re developing customer engagement strategies, and the products and services needed to facilitate the transition to a low emissions economy. Meanwhile some important sustainability priorities are less well developed, for example protecting biodiversity and human rights.

In terms of early signs of impact on the ground, some interesting numbers show that the banks have advised 15,131 corporates and SMEs on their climate strategies (as reported by 20 banks), while 113 million vulnerable customers have gained access to financial services (as reported by 41 banks) and US$ 2.3 trillion of sustainable finance has been mobilized (as reported by 87 banks).

On this last figure, analysts have projected that around US$ 4 trillion needs to be invested annually in decarbonizing the global economy therefore it’s interesting to see the level of sustainable finance mobilization from PRB signatories, indicating that capital allocation is happening at scale, even if not in all the needed areas.

There’s a lot more data in the report which I won’t repeat here but suggest interested or even skeptical parties check it out. However, speaking to the skeptics, I should write a little about what makes the PRB credible:  the accountability measures. Without accountability, there’s no credibility or integrity and the notion of responsible banking remains a nice talking point and not much more.

The PRB framework holds signatory banks accountable for delivering on their impact assessment and target setting commitments through a pretty comprehensive set of mechanisms:

  • Each signatory is required to issue an annual progress report based on a specific template and to have this report assured by a third party.
  • The entire community of signatories are required to issue a collective progress report biennially, which is what was launched for the first time last week.
  • Each signatory undergoes an individual feedback and support process annually.
  • The PRB Civil Society Advisory Body has been established as a forum for constructive and meaningful engagement between wider civil society and the collective banking industry. It’s a first for such a finance framework to have such a body. See their independent view in the collective progress report (Chapter 3) which includes 29 recommendations on areas where improvement is needed.
  • There is a mechanism to remove banks that do not fulfil their commitments from the list of PRB signatories (see Annex 1 in Banking Governance Framework).
  • And finally, because all principles frameworks get dated over time, PRB signatories are required to review the framework every two years with the first such review slated to get underway shortly.

There’s a lot there, and much devil in the detail, but these accountability mechanisms are what separates wishful thinking from real credible action across organizations and ultimately can translate into real economy impacts. This PRB community of signatories, 250 strong and growing, have taken some important steps forward, based on a rigorous framework that will grow and adapt along with this new community of responsible bankers.

Read my next blog, on the topic of the pushback that these banks and other financial institutions are seeing as they take action to scale up their sustainability engagements.

Download the PRB Collective Progress Report