There is no more doubt about the ‘why’ of climate action. It is clearer than ever that extreme weather events, unprecedented biodiversity loss and persistent inequality have put the world in a state of emergency.</p> The real issue is what the world will do about it, how and by when. Obviously, this is a complex dilemma with many varying opinions about where change should come from. Does consumer behaviour have to drive demand and make companies change their business models? Do governments need to set legislation and regulations to force change? Do companies need to motivate consumers to choose more sustainable options? The answer to all these questions is ‘yes’.</p> Change cannot come from any one place. Everyone has to play a part in fighting climate change and reaching a net-zero emissions world. </p> Banks obviously also have an important role to play. They must balance their financing of the ‘real’ economy, which isn’t universally equipped to immediately adopt low-carbon options, with financing and facilitating a just transition to a low-carbon economy. This transition requires investing billions of euros in new technology like electric batteries and newer greener ways to make steel.</p> Banks can facilitate real change by engaging and talking with clients to see what their struggles are and advising them on concrete steps they can take to contribute to the energy transition. It’s then the responsibility of banks to help them fund those changes.</p> Banks can help this process by making financing conditions based around proving sustainable credentials, incentivising companies around the world to become greener. This is a system that’s already in place for sustainability-linked loans and bonds, where interest rates are linked to sustainability performance. ING was the first bank to link financing to how well a company performs on sustainability with a loan to Philips in 2017.</p> The best way to measure the industry’s efforts, and to know that this engagement is making a difference is to steer loan portfolios towards net-zero goals, and use science-based scenarios for the sectors held within individual loan books. Financing must move towards low-carbon technologies and away from carbon-producing technologies.</p> It’s not something one bank can do alone, and initiatives such as the 2°Investing Initiative (2DII) developing open-source methodology and UN-led Collective Commitment to Climate Action, which was signed by over 30 banks in September 2019, are integral in these efforts. </p> This kind of collaboration must only increase. No one sector or industry will solve the climate crisis by itself. Businesses, lenders, governments, supra-nationals, trade bodies and regulators must all continue to come together to tackle this collective concern. Everyone needs to work collaboratively and commit to reporting and measurement that is constant, clear and transparent. Any methodology must also be truly open source and available to all, creating a level playing field and ensuring a real impact.</p>