United Nations: In order to fight climate change, Banks with more than $47 trillion in assets, or a third of the global industry, have adopted a new sustainable method of banking, the U.N.- backed “responsible banking” principles, on Sunday. The new banking method will hopefully shift their loan books away from Fossil fuels.  

130 banks to sign up for new sustainable banking method

There are about 130 banks in total to join the banking methodology, among which are the popular Deutsche Bank, Citigroup, and Barclays on the eve of a United Nations summit in New York, with objectives to push these companies and government organizations to act quickly to fight global warming.  

Read: UN Chief Warns Annexation Of West Bank Would Violate International Law

Simone Dettling, banking team lead for the Geneva-based United Nations Environment Finance Initiative informed a global media agency that these new sustainable principles mean banks have to consider the impact of their loan system on the society as well as the environment, and not just their official portfolio.  

Many banks have acknowledged the role of loan lenders on the environment, and the need to play in rapid transition to a low-carbon economy, acting under the pressure from investors, regulators and climate activists. Banks financing for oil, gas and coal projects has come under specific scrutiny because of environmentalists and climate scientists that have stepped up to change the global economy’s deep reliance on fossil-fuels to avert disastrous warming. 

Read: 18 Things Former RBI Governor Raghuram Rajan Said Should Be Done To Tackle NPAs And Other Indian Banking Sector Woes

The sustainable principles, drawn up jointly by U.N. officials and banks are as follows: 

- Align their strategies according to the 2015 Paris Agreement to fight global warming and U.N-backed targets to lower the poverty. 

 - Set targets in order to raise “positive impacts” and lower the “negative impacts” on people and the environment 

Read: Finance Minister To Hold A Review Meeting With Public Sector Banks

- Work with clients and customers to encourage sustainable banking practices. Be honest, transparent and informative that encourages banks to pivot their loan portfolios in eco-friendly assets and away from carbon-intensive assets and redirect capital to greener industries.

However, critics argue that banks should not limit their reach by just following transparent sustainable rules but also phase out financing for fossil fuel projects and agribusiness that drive deforestation in the Amazon, Southeast Asia, and other regions. Although, the new standards could also force participating banks to choose between foregoing business from clients in high-carbon sectors and the risk of being accused of backsliding on the principles if they continue to finance such firms. 

Read: Global Warming Shrank Indian Economy By 31 Percent: Study