The role of financing in combating climate change is coming under increased scrutiny. Of the major Swiss banks, UBS is doing better on this than Credit Suisse, according to a study.
UBS’ loan book has a 13.7 percent gross exposure to what it terms «climate-sensitive» industries, whereas Credit Suisse’s total potential exposure to what it calls carbon-related and climate-sensitive» sectors is 17.6 percent, a «Bloomberg» study on European banks and climate change published Tuesday shows. Both banks, along with U.K.-based Barclays, were described in the study as those making the greatest effort to put their data into context.
However, Bloomberg points out that «there is no one set of disclosure standards that banks are obliged to follow and they differ on how to measure key information and what they should release publicly. As a result, investors, regulators and the public would face difficulty in determining which lenders face the highest risks and are taking the most determined action.»
Transparency Goals
This chimes with the view of Swiss financial market regulator Finma. It will require the largest Swiss banks and insurers to report on potential climate risks related to their business, from June 1, the regulator said on Monday. It said its primary aim was transparency.
Specifically, financial service providers must describe major climate-related financial risks and their impact on business strategy, model, and financial planning and disclose how they identify, assess, and manage them, Finma said. It also wants to know how the matter is governed internally.
Private Banking Vs Wall Street
Bloomberg highlighted the fact that UBS has a much smaller loan book than Credit Suisse and Barclays because of its focus on wealth management. Around 6.5 percent of Barclays’ total loans, advances and commitments have «elevated risk from climate change» using the bank’s own metric.
Of Credit Suisse’s $83 billion exposure, $23.8 billion, or 29 percent, comes under the industrials category, $23.6 billion (28 percent) is to transportation and autos, $13.1 billion (16 percent) to oil and gas, $8.2 billion to commodity trade finance (ten percent), $7.3 billion to power (nine percent), $4.9 billion (six percent) to metals and mining as well as $1.0 billion (one percent to coal, the study showed.
More Credit On Oil Than Green
By comparison, UBS’ $38.8 billion exposure is spread among real estate ($13.4 billion or 35 percent), oil and gas ($5 billion, or 13 percent), construction and materials ($3.9 billion, or ten percent), mining ($3.3 billion, or nine percent), transportation ($2.3 billion, or six percent), food and agriculture ($2 billion, or five percent), and autos ($966 million, or two percent).
Bloomberg said that over 2016-20, both Swiss banks issued more debt for oil and gas companies than they did green and sustainable bonds: Credit Suisse issued $26 billion in oil and gas bonds, almost four times more than the $7 billion in green bonds it issued. UBS issued $11.4 billion in corporate bonds for oil and gas companies, nearly double the $5.8 billion in green bonds.
