Frankfurt School of Finance & Management today launched an EU-wide study on the climate performance of banks. The results of the study "finance fit for Paris (3fP)" are intended to help banks to comply with the Paris Climate Agreement. The business school has compiled the results in two reports: a technical handbook on how to adapt the banks' business model to the Paris climate targets and a status report on the European banking market.
Based on the definition of a vision of a Paris-compatible business model, the two so-called 3fP banks reports provide information on how existing instruments and methods for banks can be used to adapt their business model to the Paris Agreement, what practical steps can be taken to implement corresponding methods and tools and how European banks are currently implementing this. The reports also present current best practice examples.
Status report on the climate compatibility of banks
Since 2018, Frankfurt School has been measuring the climate compatibility of financial regulation with its "finance fit for Paris (3fP)" tool. The measurements show that financial regulations in Germany and Europe have become more climate-friendly in recent years. Now, for the first time, a measurement of banks is being published. This shows that the banking sector can still make significant progress in becoming more climate-friendly. Although green financial products are already part of the core portfolio of many banks, the overall orientation of the business model is not yet in line with the objectives of the Paris Climate Agreement.
Implementation support for banks
In June 2020, 16 institutions in the German banking sector made a voluntary commitment to the goals of the Paris Climate Agreement. The Frankfurt School is now presenting technical implementation options for this voluntary commitment in a handbook. The handbook shows that there are many possibilities for implementing the voluntary commitment, but that there is also a need to catch up in terms of regulation and methodology. An interview-based market survey shows that especially the advisory services and the pricing of loans should be strengthened by regulators and staff training.
Accompanying the launch of the reports, climate experts from the Frankfurt School and project partners such as the Spanish consultancy Afi today discussed "Sustainable finances in a turbulent year: Are European banks fit for Paris? The presentation and discussions show that climate protection has become a central topic in the banking industry. However, the representatives of the industry also see a need for further action. The roles of regulation and pre-competitive method development were particularly emphasised.
The "finance fit for Paris (3fP)" project has been funded with support from the European Climate Foundation. Responsibility for the information and views set out in this project lies with the author(s) and the European Climate Foundation cannot be held responsible for any use which may be made of the information contained or expressed therein.”
The technical handbook and the status report on the European banking market can be downloaded here.