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The biggest banks in the world have pledged to go green. But a new study, published by the European Central Bank, has found that those promises often amount to more talk than walk.
What's happening: Just over two years ago, the world's largest lenders and asset managers gathered in Glasgow and pledged to spend a collective $130 trillion (that's nearly five times larger than the US economy) to tackle climate change. What emerged was the Glasgow Financial Alliance for Net Zero (GFANZ) – now made up of 675 financial powerhouses spanning 50 countries.
"We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account," Mark Carney, the alliance co-chair, UN Special Envoy for Climate Action and former head of the Bank of England, said in a statement at the time.
The financial institutions voluntarily pledged to make sure that the companies they invested in slashed their emissions. They also said they would align their lending policies with the goal of limiting global temperature increases to 1.5°C from pre-industrial levels.
But a new report that analyzed lending by some European signatories, published by economists from the ECB, MIT and Columbia Business School, casts doubts on whether the promises had made any substantive changes.
"Our results cast doubt on the efficacy of voluntary climate commitments for reducing financed emissions, whether through divestment or engagement," they wrote in their report.
About 10% of the 300 banks the study analyzed had joined the Net-Zero Banking Alliance (a group led by GFANZ and backed by the United Nations).
They found that banks in the alliance did not increase interest rates on loans to companies with high carbon emissions and the companies receiving loans from banks in the alliance were not more likely to set goals for decarbonization.
Since 2018, they found, European banks had reduced their lending by just 20% to carbon-heavy sectors like oil, gas and transport.
Researchers found that the decline was the same for all banks, regardless of whether they signed onto the commitment.
GFANZ declined to comment but pointed CNN to a BloombergNEF research report that showed that banks in the Net-Zero Banking Alliance deployed a much greater percentage of their finance into clean energy than banks that weren't in the alliance.
Leaving the group: The study comes at a time when some large banks are pulling out of high-commitment climate pledges and Republican backlash grows against investing strategies that evaluate stocks using environmental, social and governance factors.
The insurers' climate alliance, another group under GFANZ, lost nearly half of its members last year as a group of Republican attorneys general accused the insurers of potentially breaking US antitrust laws.
JPMorgan Chase and State Street quit Climate Action 100+, an investor-led climate change initiative, last year.
"The climate challenge is immense and complex," said JPMorgan CEO Jamie Dimon in his annual letter to shareholders this week. "Addressing it requires more than making simplistic statements and rules."
Dimon said JPMorgan erred when it used the word "commitment" instead of "aspirations we are actively striving toward."
"While we don't necessarily disagree with some of the principles many organizations have, we make our own business decisions," he added, noting JPMorgan has invested in its own in-house climate team.
State Street did not immediately respond to CNN's request for comment.
Climate experts expect that over $5 trillion must be invested into climate action annual to meet current goals.
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