Ceres: Financing a Net-Zero Economy

In an October report, Ceres lays out how banks can discuss and mitigate their climate risk exposure.

As the lynchpin of the global economy, banks have an essential role to play in minimizing the worst impacts of climate change. Climate risk has the potential to significantly damage financial institutions and the broader economy—and impede society’s ability to tackle climate change at the speed and scale required to avoid its worst impacts. This is doubly true because the understanding of tail risks—risks once thought too extreme to consider—has dramatically changed, first with the 2008 financial crisis and now with the COVID-19 pandemic.

Many banks have begun to act, including Barclays, JPMorgan Chase and Morgan Stanley, but for most banks, the current view of climate risk is incomplete—it focuses narrowly on fossil fuel sectors or broadly on the need for policy action. It is what lies in the middle—the massive amount of financing banks provide to sectors, including agriculture, manufacturing, construction and transportation, that rely heavily on oil, gas and coal—that could threaten climate and financial stability if unaddressed.

This report investigates banks’ climate-related financial risks and their exposure to a disorderly transition. Based on the finding that a majority of bank lending is in climate-exposed sectors, the report also lays out a blueprint for bank action with key recommendations for how banks can discuss their climate risk exposure and the mitigation strategies they can use to address this risk exposure and broader climate-related societal impact.

Ceres is a nonprofit that works with investors and companies to promote sustainable solutions to challenges including climate change, water scarcity and pollution, and inequitable workplaces. Founded in response to the Exxon Valdez oil spill in 1989, Ceres promotes what it calls “the business case for sustainability.” Ceres' climate-related work can be found here. Its most recent official financial disclosure is here.