German banks on the way to climate neutrality? A review of the situation (Revised)

Previous international climate change agreements have primarily been driven by states, such as the Kyoto Protocol in 1997 and the Paris Agreement in 2015. Perhaps due to the national focus, dis-cussions and actions to date have centred on direct carbon emissions from households, transport and industry. However, it is important not to overlook the significant potential for the financial industry to contribute towards combating climate change. While Germany's Climate Protection Act provides a framework for these goals, it does not impose requirements on banks. However, German banks committed to fulfil their climate policy responsibility. In this paper, we analyze the goals and measures that German banks plan to pursue in their efforts to combat climate change based on self-statements found in their strategy papers. For our analysis, we use six indicators comprising targets and measures in order to obtain a differentiated and comprehensive overview of the activ-ities. Our results indicate that most German banks intend to contribute to the Paris climate goals, as shown by targets set. Many banks have at least started laying the groundwork for monitoring their progress. However, the banks' documents provide limited insight into the specific implemen-tation of their measures. We find that excluding financing for the coal sector is up to now the most common approach, followed by the exclusion of financing in the oil and gas sector. Sector-specific management control instruments, such as technological guidelines, are less widespread but have been incorporated into many banks' strategies. Information on positive criteria was rather scarce.

Note: This working paper presents an updated analysis of our 2023 version (Wilhelm, M.; Aydemir, A.; Rohde, C. (2023): German banks on the way to climate neutrality? A review of the situation). While the empirical findings remain based on 2021 data and the sample of 16 German banks is unchanged, several substantive revisions have been made to strengthen the theoretical framework and policy discussion.