The World Economic Forum (WEF), acknowledging that banks are exposed to a number of climate-related risks through the diverse range of sectors they finance, has urged that they take bold action to fight climate change.

WEF said across the world, banks continued to fund high-carbon industries, thus enabling a range of activities that undermine efforts to keep global temperatures rises well below two degrees Celsius.

Almost all global banks continue to finance coal mining and coal power plants, despite it being increasingly clear that there is no space for new coal in a world aligned with the United Nations sponsored Paris Agreement.

A high-carbon future would lead to increased physical risks across most industries due to trade disruption from extreme weather events.

At the same time, if the goals of the Paris Agreement are met, high-carbon assets are at risk of becoming much less profitable very quickly.

WEF said however, banks were able to play a positive role by actively financing the low-carbon transition.

They have already started to focus attention on the commercial opportunities associated with lending and financial services that facilitate cleaner energy.

“This needs to accelerate. In fact, it is estimated that in total the world needs to spend US$359 trillion by 2050 to avoid catastrophic climate change. Current outlays are still very far from this total.”

WEF said ShareAction’s latest survey ranks Europe’s 15 largest banks based on how they manage climate-related risks and opportunities.

WEF said the ShareAction survey showed when it came to disclosure, few banks would disagree that the climate-related information provided in their financial filings needs to be improved.

Following the publication of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and amid mounting investor pressure, there has been little pushback on the demands made around banks’ own disclosures.

When it came to taking concrete action to manage climate-related risks and opportunities, many banks were more reluctant.

Certainly, banks have begun to develop innovative low-carbon products and services, ranging from green bonds and green mortgages to green deposits.

Most European banks have also begun to mitigate some climate-related risks by, for example, refusing to provide financial services to high-carbon companies, such as those involved in coal mining or tar sands.

Despite this, the measures taken so far are still not enough to enable the world to meet the goals of the Paris Agreement.

The reasons banks provide for their inaction are manifold, but the key arguments touch on the legislative and regulatory landscape, a lack of data availability and, most importantly, the ongoing profitability of financing high-carbon companies and projects.

The ShareAction survey indicated none of the arguments justify the current lack of action.

Large global banks are powerful actors able to influence policymakers across the world.

While problematic in many ways, the green supporting factor, which is currently being discussed at European Union-level and proposes to lower capital requirements for environmentally friendly investments, is one example of bank lobbying leading to climate action by those in power.

The WEF says that waiting for the development perfect methodologies, based on perfect data, before taking any action would almost certainly mean failing to meet the Paris Agreement.

Even if carried out with imperfect data, an analysis based on the 3-4°C scenario the world is currently on track for should highlight how the physical impacts of climate change might affect global banks, and be serious enough to make it obvious that bold action needs to be taken imminently.

“The lock-in of high-carbon infrastructure, even if still profitable today, has to be avoided.

Continuing to lend money to high-carbon industries in the short term ignores the fact that there will, at some point, be a top to this market.

“It is important that banks question which clients are going to remain profitable in the long run, and therefore which relationships are worth developing and maintaining as we head into a low-carbon economy.

WEF says the case for banks to go beyond disclosure and take bold climate action has never been clearer or more urgent.

The time for making excuses is over, banks now need to step up to their responsibility and use their significant influence over the global economy to create a sustainable future for all.