Banks Falling Short on Climate Adaptation, New AI Ranking Shows
Most of the world’s largest commercial banks are lagging behind in climate-proofing their operations, according to a new AI-powered ranking by Climate X and Climate Proof. Despite the growing awareness of climate adaptation, a significant gap remains in implementing effective, AI-driven strategies, especially among the top financial institutions.
Only a Few Banks Meeting Criteria
The AI-driven ranking reveals a startling fact: out of the world’s 50 largest banks, only seven meet more than half of the climate adaptation criteria. None of the banks meet all of the requirements. The study highlights the need for more urgent action, showing that climate adaptation is still not a priority for most banks.
European and UK banks are leading the way, outperforming their peers in the US, Canada, and Australia. The study attributes this to stricter climate policies and frameworks in Europe, which push banks to act faster on adaptation measures. Notably, Standard Chartered, Banco Santander, and UniCredit are among the top performers, demonstrating advanced engagement with climate strategies.
US Banks Lag Behind
On the other hand, US banks are at the bottom of the list. Institutions such as Morgan Stanley, Capital One, Goldman Sachs, and US Bank ranked the lowest in the study. This poor performance indicates a lack of urgency in addressing climate adaptation, particularly in the North American market.
Lukky Ahmed, CEO of Climate X, emphasized the importance of this shift, stating, “Climate adaptation is no longer a choice for the financial sector – it’s a necessity. While some banks are starting to prepare for a hotter, more volatile world, most have a long way to go. Banks need to incorporate adaptation into their strategic decisions and offer products and services that promote resilience.”
AI-Powered Evaluation and Key Findings
The ranking used a unique methodology, relying on a Large Language Model (LLM) to evaluate the banks’ adaptation readiness. The AI analyzed the banks’ public disclosures, focusing on their annual reports. The evaluation was based on 17 qualitative indicators, providing a clear picture of where banks stand in terms of climate preparedness.
Kamil Kluza, COO of Climate X, noted that while the ranking offers valuable insights, it also uncovers major gaps in transparency. “Most banks are not setting adaptation impact metrics, and few have clear lending strategies that support communities and businesses affected by climate-related disasters,” Kluza explained.
Conclusion
The ranking by Climate X serves as a wake-up call for the financial sector. While some banks are making progress, the majority still fall short of taking the necessary steps to combat climate change. Without more ambitious adaptation strategies, the sector risks being unprepared for the challenges of a hotter, more volatile world.