Analysing the quality of sustainable power supply commitments

The good, the bad and the in-between of financial institutions’ sustainable power supply commitments

0

banks assessed have a sustainable power financial target.

0

of the banks assessed correctly defines sustainable power.

0%

of the banks assessed still finance fossil fuel expansion.

Why track sustainable power policies?

According to the International Energy Agency’s Net Zero Emissions scenario to limit global warming to less than 1.5°C, annual investments in the energy transition need to be multiplied by 2.5 between now and 2030 to achieve net zero by 2050. In that context, banks can play a major role in the transition by supporting the power decarbonisation with two levers:

  • Massively increase financial flows for a new sustainable power system, mainly based on wind and solar.
  • Immediately stop financing fossil fuel expansion and support a phase out of the coal, oil and gas sectors.

The Sustainable Power Policy Tracker is designed to track the commitments adopted by the top 60 banks worldwide regarding their support for sustainable power. It evaluates and compares these commitments, identifies loopholes and promotes good practice. Its primary objective is simple: to ensure that banks are adopting the necessary commitments on sustainable power to effectively contribute to achieve the 1.5°C climate goal.

To find out more about the coal, oil and gas policies adopted by financial institutions worldwide, visit our Coal Policy Tracker and the Oil & Gas Policy Tracker.

How to use the tracker?

Last policy update: 10/24/2023 with 60 banks assessed.

This financial institution demonstrates some of the best practices with the adoption of robust commitments to the energy transition

Reclaim Finance could not give a definite score and have contacted the financial institution for clarification.

Restrictions for coal expansion.

Restrictions for oil and gas expansion.

How to read the results?

This criterion rates bank’s definition of sustainable power supply scope.

Grade Sustainable definition
0 No clear definition of power supply scope: power generation sources, technologies for transmission, distribution and storage included.

OR

Use of blury terms such as « low carbon », « green » or « clean » without further precision.
1 Energy sources and technologies included in the scope are partially detailed [1].
2 Energy sources and technologies included in the scope are fully detailed [2].

AND

The scope does not include any fossil fuel related technologies, such as fossil fuels with Carbon Capture and Storage (CCS), hydrogen from non-sustainable sources, CCS dedicated to power generation plants, Direct Air Carbon Capture (DACC)
3 Energy sources and technologies included in the scope are fully detailed.

AND

The scope does not include any solution identified for this tracker as unsustainable [3].
4 Energy sources and technologies included in the scope are fully detailed.

AND

The scope does not include any solution identified for this tracker as unsustainable.

AND

The definition includes power transmission & distribution.
5 Energy sources and technologies included in the scope are fully detailed.

AND

The scope does not include any unsustainable solution.

AND

The scope includes power distribution with explicit references to energy storage and electricity grid.

AND

The scope is guided by strong human rights policies such as the UNDRIP, e.g. FPIC.


A penalty of -1 is applied if the scope is explicitely different for some products/services (eg. only green bonds or green loans) or if the scope covers current financing but does not explicitely refers to future financing. Minimum score remains 0.


Notes:

  1. The bank refers to an external taxonomy that is not exhaustive or non-binding, or the bank uses an internal taxonomy that is not fully detailed.
  2. The bank refers to an exhaustive and binding external taxonomy or the sources and technologies included in its internal taxonomy are fully detailed.
  3. Based on Reclaim Finance’s research.
This criterion rates bank’s financial target for sustainable power supply.

Grade Financial target
0 No specific financial target for sustainable power supply or « energy transition ». Targets dedicated to broad « sustainable finance » themes that are not restricted to sustainable power supply do not qualify.
1 The financial target checks at least 2 basic criteria. (see below the grid) and it is specific to sustainable power supply. It may apply only to one or several subsidiaries of the group.

OR

There is a broad « energy transition » financial target, that encompasses sustainable power supply, energy efficiency and end-uses aspects, and it checks at least 2 basic criteria.
2 The financial target is specific to sustainable power supply and checks at least 2 basic criteria. It applies to the group and is not limited to one or several subsidiaries.
3 The financial target is group-wide, specific to sustainable power supply and checks all basic criteria.

AND

The target induces significant [1] financing towards sustainable power supply, compared to fossil fuels financing.
4 The financial target is group-wide, specific to sustainable power supply and checks all basic criteria.

AND

The target induces significant [1] financing towards sustainable power supply, compared to fossil fuels financing.

AND

The target covers both direct (i.e. lending activities) and indirect (i.e. capital maket activities) finance. OR The targets covers both project and corporate finance for sustainable power « pure players ». Pure player definition is published and credible [2].
5 The financial target is group-wide, specific to sustainable power supply and checks all basic criteria.

AND

The target induces significant [1] financing towards sustainable power supply, compared to fossil fuels financing.

AND

The target covers both direct (i.e. lending activities) and indirect (i.e. capital maket activities) finance. OR The targets covers both project and corporate finance for sustainable power « pure players ». Pure player definition is published and credible [2].

AND

The target induces either of the following: Additional commitment on annual financing by 2030: achieve a 6:1 ratio on power supply financing [3]. OR Additional commitment on annual funding by 2030: triple financing for power generation AND double financing for power distribution [4].


A bonus of +1 is applied if the target checks all basic criteria and is cumulative [***]. Maximum score remains 5.
A bonus of +1 is applied if the target is a ratio or a percentage of the energy portfolio. Maximum score remains 5.
A bonus of +1 is applied if the target is splited between (1) power generation and (2) power distribution, transmission and storage. Maximum score remains 5.
A bonus of +1 is applied if their the target checks all basic criteria and there is an additional target for 2035. Maximum score remains 5.
A penalty of -1 is applied if the target bundles financing services with other non-financing services (e.g. M&A advisory). Minimum score remains 0.

Basic criteria

There are three basic criteria:

  • The baseline year is later than 2019 or no more than two years before the target was set.
  • A « main » target is set for 2030.
  • One or several intermediary targets are set before 2030.


Notes:

  1. Based on the comparison of the bank’s annualized target for sustainable power supply and its annualized fossil fuels financing (data from Banking on Climate Chaos by RAN et al.). The annualized level of the target is projected assuming even distribution accross the period: division of the total commitment amount by the number of years in the commitment period. This applies for flow or stock commitment.
  2. Credible means that a « pure play company » is defined as a company deriving over 90% of its revenue from sustainable power supply.
  3. Based on NZE scenario for power supply. (IEA – World Energy Outlook 2022)
  4. Based on NZE scenario for power sector. (IEA – World Energy Investment 2023)
This criterion rates bank’s target for financed new sustainable power capacity.

Grade Capacity Target
0 No new capacity additions target for sustainable power supply.
1 The capacity target checks at least 2 basic criteria (see below the grid). It may apply only to one or several subsidiaries of the group.
2 The capacity target checks at least 2 basic criteria. It applies to the group and is not limited to one or several subsidiaries.
3 The capacity target is group-wide and checks all the basic criteria.

AND The capacity target is partially detailed by energy sources. OR There is a target for power storage.
4 The capacity target is group-wide and checks all the basic criteria.

AND

The capacity target is partially detailed by energy sources AND for power storage capacity

AND

Wind and solar representing a meaningful share of the target [1].
5 The capacity target is group-wide and checks all basic criteria.

AND

The target is detailed by energy sources AND power storage capacity.

AND

Wind and solar represent a meaningful share of the target.

AND

Additional commitment: annual power storage capacity additions in 2030 are aligned with the NZE scenario [2]. OR Additional commitment: annual capacity additions by 2030 aligned with the NZE scenario [3].


A bonus of +1 is applied if a significant share of the target is oriented towards non-OECD countries. Maximum score remains 5.

A bonus of +1 is applied if the target checks all basic criteria and there is an additional target for 2035. Maximum score remains 5.

A penalty of -1 is applied if the target is not exclusively focused on new capacities (e.g. bundle of greenfield and brownfield projects).

Basic criteria

There are three basic criteria:

  • The baseline year is later than 2019 or no more than two years before the target was set.
  • A « main » target is set for 2030.
  • One or several intermediary targets are set before 2030.

Notes:

  1. Based on NZE scenario, wind and solar represent 88% of new installed capacity in 2030. (IEA – World Energy Outlook 2022)
  2. Based on NZE scenario, power storage capacity must increase 29-fold in 2030 compared to 2021. (IEA – World Energy Outlook 2022)
  3. Based on NZE scenario, the annual rate of new renewable capacities installed in 2030 must quadruple compared to 2022 (IEA – Credible Pathways to 1.5°C, April 2023)

This criterion rates bank’s reporting regarding several aspects: publication of baseline level and yearly progression, publication of a financing ratio and granularity of reported information regarding financial products and services mobilized, the power sources and technologies financed, the new capacities financed, and their geographical distribution.

Grade Reporting
0

Reporting is not yearly published [1].

OR

There is no specific reporting for power supply [2]. OR No transparency.
1 Very limited transparency.
2 Limited transparency.
3 Moderate transparency.
4 Advanced transparency.
5

Robust transparency.

AND

The ratio of annual financing for sustainable power compared to fossil financing is published, with its evolution between each publication, with exhaustive and comparable scopes of financial products and services.

A bonus of +1 is applied to the 0-5 score for the publication of the ratio of annual financing for sustainable power compared to fossil financing and its evolution between each publication, with exhaustive and comparable scopes of financial products and services. This is mandatory for score 5, maximum score remains 5.

A bonus of +1 is applied to the 0-5 score if the reporting discloses the split between new financing and re-financing, between new or existing assets (e.g. split between greenfield and brownfield). Maximum score remains 5.

A penalty of -1 is applied to the 0-5 score if the reporting only or mostly encompasses green bonds. Minimum score in that case is 1.

Notes:

  1. Yearly reporting is mandatory to achieve more than 0, with an exception for banks currently publishing their first reporting.
  2. Reporting for « green finance », « sustainable finance », « ESG finance » or any reporting blending power supply with other topics are not considered. Also, reporting for the broad energy sector or power sector without specific transition material is not considered.
This criterion evaluates bank’s attitude toward fossil fuels expansion [1], specifically companies developing new fossil fuel projects.

Grade Coal Expansion Grade Oil and Gas Expansion
No or very weak restrictions on support for companies with coal expansion plans. No or very weak restrictions on support for companies with oil & gas expansion plans.
Weak restrictions on support for companies with coal expansion plans. Weak restrictions on support for companies with oil & gas expansion plans.
Moderate restrictions on support for companies with coal expansion plans. Moderate restrictions on support for companies with oil & gas expansion plans.
Robust restrictions on support for companies with coal expansion plans. Robust restrictions on support for companies with oil & gas expansion plans.

Notes:

  1. This criterion is based on the evaluation of fossil fuels policies from the Coal Policy Tracker (criterion « developers ») and the Oil & Gas Policy Tracker (criterion « expansion »).

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