Global professional services firm, Alvarez & Marsal, has released the results of the inaugural Green PACE Ranking, proprietary research that ranks how the top 25 European and North American banks are capitalizing on sustainability as a business opportunity.
The report found that UK banks are outperforming their European and US counterparts on the transition to net zero, with NatWest coming out top of the chart, by a margin of over 10%. The outperformance of UK banks, and NatWest in particular, can be attributed to strong investment and commitment in the capability areas assessed, including green product offering, alignment targets, customer focus and participation in the execution of the transition.
US banks are doing less well, with only 1 US bank in the top 10 (JP Morgan Chase & Co). The poor performance of US banks is due to their lower maturity in ESG practices and commitments.
A&M’s Green PACE ranking is based on an assessment of banks’ performance against four attributes that A&M believes will define sustainability winners. These are:
- Green products: A&M examined whether banks offered a wide range of sustainable financial products, including bonds, loans and derivatives for both green and sustainable related purposes. A&M estimates that the top 25 European and US banks have committed €13 trillion to sustainable finance as targets by 2030, this figure represents 37% of total banking assets or 15% of global GDP.
- Net zero alignment: A&M benchmarked the banks’ net zero goal, including number of portfolios, asset coverage, data quality, and internal tools. A&M found that most banks have pledged to phase out coal financing in the EU/OECD by 2030 and globally by 2040, with a handful of banks pledging to phase out earlier. A&M’s benchmarking also shows that US banks have a higher intensity in their oil and gas-funded issuances.
- Customer focus and insights: A&M followed transition guidance and analytics linking customer transition business solutions to financial business case and personalized insights.
- Executing transition plans: A&M analyzed banks’ involvement in operational execution through investments in climate technologies, innovative joint ventures and digital platforms.
Fernando de la Mora, Managing Director of Alvarez & Marsal, said: “Global banks have recognized that the transition to net zero does not have to be a thorn in their side and is instead a huge business opportunity. Sustainable banking strategies are evolving from being focused on regulation and compliance to a broader range of initiatives that can generate new revenue streams and innovative solutions for customers.
“We see a growing number of financial institutions placing sustainability at the heart of their business priority. Our Green PACE ranking offers banking leaders a new framework to help them leverage ESG as a business opportunity.