As a major global bank, Company is broadly exposed to financial stability risks posed by climate change and has made certain climate-related
commitments. Banks aligning their activities with their climate goals are better prepared to manage risk, including legal, reputational and
financial risks associated with climate change and capitalize on opportunities associated with the global energy transition.
According to the International Energy Agency, reaching net zero greenhouse gas emissions by 2050 requires rapid transition away from fossil
fuels and tripling in global annual clean energy investment by 2030.1 The pace at which low-carbon energy supply is scaled up will dictate the
rate at which fossil fuels are phased down.2
Company is reportedly among the largest global financiers of fossil fuels; however, it has committed to achieve net zero emissions in its
financing activities before 2050 and to a goal of mobilizing and deploying $1 trillion by 2030 “to accelerate the environmental transition.” 3
Although Company has robust commitments to sustainable finance, investors need further disclosure to assess its clean energy financing activity
and relative financing of fossil fuels.
The ESR, a dollar-based metric, will complement and supplement Company’s existing emissions-based climate financial disclosures, including any
disclosures under European Union reporting requirements, and provide decision-useful disclosure on Company’s activities and progress toward
its public commitments. In recent years, banks reportedly earned more in lending and underwriting fees from clean energy projects than from oil
and gas, and coal companies.4 Investors seek to assess whether Company is positioning itself as a leader in the energy transition.
The ESR has become a key climate disclosure metric. Bloomberg provides to its clients ESRs for global banks, including Company, using a
standardized methodology with clear definitions for ‘low carbon’ and ‘fossil fuel,’ however, it excludes lending. 5 Three leading North American
Banks, Citi, JPMorgan and Royal Bank of Canada committed to disclose an ESR, and their methodology, demonstrating that disclosure is feasible
and leading market practice.
Investors believe Company should similarly disclose its annual ESR for which it is accountable, and work toward an industry-standard approach
for calculating and reporting it. Bloomberg published an Implementation Guide6 and the Institute of International Finance, a financial industry
association with around 400 members globally, published a 2024 whitepaper that provides a potential format for standardized disclosure of
methodological design choices. 7