Financial institutions benchmark launches

Finding only 2% of 400 leading firms have interim targets

The World Benchmarking Alliance has today launched a financial system benchmark tracking 400 of the world’s leading financial institutions, including asset owners, banks, asset managers and insurers.

It is the first benchmark developed by the Alliance focused on financial institutions and marks a positive step for transparency in the sector, Paloma Munoz Quick, global lead, financial services and human rights, told ESG Clarity in today’s human rights roundtable.

Watch the full roundtable here.

“They’re evaluating institutions across asset classes on their alignment with the UN Guiding Principles,” she said. “It’s really starting to raise a lot of questions among institutions that have been, I’ve found in the past, rather quiet and more focus on environmental issues, for example.”

The Financial System Benchmark, which covers governance, planetary boundaries as well as human rights and social issues, has found financial institutions lacking when it comes to climate action.

Only 2% of financial institutions disclose their financing to low-income countries, despite $100bn worth of climate finance being promised to enable adaptation and mitigation.

On targets, less than 40% of financial institutions have disclosed long-term net-zero targets. Of these commitments, only 2% have been translated into interim targets, of which just 1% are backed by scientific evidence.

Less than 5% of financial institutions acknowledge they have a process to identify the impact of their financing activities on nature. 

“It shows a dismal picture overall of where we are now, but the intention is for it to provide a roadmap for companies themselves,” said Andrea Webster, World Benchmarking Alliance financial systems lead.

“While we recognise that great efforts are being made by many, frustration is high and trust in the sector is low. There is no hiding from the fact the world is behind on where it should be towards net zero and in ensuring that no one is left behind.”

The release of the Financial System Benchmark will be followed by the publication of a full Insights Report in 2023.


Natasha Turner

Natasha is global editor at ESG Clarity, part of Mark Allen Financial, and has been a financial journalist for seven years. She has been shortlisted for Story of the Year and Investment Journalist of the...