We Reviewed the Climate Disclosures of the World’s 100 Largest Financial Institutions. Here’s What We Found.

Transition plans are becoming more common, but are not the only indicator of progress.

COP29 is set to be a big moment for climate finance, with decisions due on determining future commitments via the New Collective Quantified Goal (NCQG). While negotiations will primarily focus on agreeing on public finance volumes and processes necessary for climate mitigation and adaptation —especially in support of developing nations — it is crucial to also highlight the progress made and the gaps that remain in aligning private finance with the goals of the Paris Agreement. Annual investment to support the transition needs to double in the next 5 years (from $2 trillion today to $4 trillion by 2030, according to the IEA), and up to 70 percent of this will need to come from private finance. To ensure that private finance remains an accountable and important player in the transition, RMI has summarized the state of progress among the largest private finance institutions globally and identified areas to accelerate action.

When RMI last checked in on the state of the market in 2023, we saw that climate-related market norms were already being established: The largest financial institutions were announcing net zero commitments and setting interim targets, despite questions of disclosure credibility and commitment accountability. Today, questions on transition planning standardization, transparency, and execution have risen to the fore.

In this article, we review the climate disclosures of the world’s largest 100 financial institutions by assets, including asset managers, banks, insurance firms, and sovereign wealth funds, and synthesize key trends. Net-zero commitments have broadly plateaued, but many financial institutions are now taking the next step by actively planning their support for the transition. Although case studies are emerging, norms for effective transition planning are not yet standardized in the industry despite growing uptake of broader climate reporting standards.

Net-zero commitments plateau; transition planning doubles

Financial institutions have now accepted that net-zero commitments are the norm of the industry, with uptake plateauing following the rapid rise of declarations between 2021 and 2023. In 2024, 74 percent of the largest financial institutions have net-zero commitments, compared to 73 percent in 2022 and just 38 percent in 2021. The focus within financial institutions has now shifted to transition planning, developing concrete strategies to achieve institutional climate commitments. In 2022, only 28 percent of the largest financial institutions had published separate or labeled transition plans. Today, 43 percent of the largest financial institutions have formal transition plans. Exhibit 1, however, shows that this picture of net-zero commitments and transition plan publication varies by region.

Exhibit 1.

Europe leads the way on transition planning. Chinese banks do not commit to net zero but make progress on climate disclosure.

Europe stands out as a leader in transition planning: two-thirds of the 35 European financial institutions in the top 100 list now have transition plans, significantly outpacing the global average of 43 percent. North American financial institutions lag behind Europe’s. Even though 89 percent of North American financial institutions have net zero commitments, only 34 percent have published transition plans.

Beyond a formal transition plan, though, our analysis suggests that many financial institutions are showing signs of transition planning activity. 73 percent of the world’s largest FIs have disclosures that align with four out of five of the GFANZ (Glasgow Financial Alliance for Net Zero) transition planning criteria, indicating that the shift from commitment to planning is well underway. These metrics show a clear shift in Europe in particular, where 90 percent of all large FIs publish documents in line with at least four of the five GFANZ transition planning criteria (See Exhibit 2).

Exhibit 2.

The global norm may be net zero commitments, but Chinese financial institutions seem to be pursuing another path. No Chinese financial institution has a net zero commitment, but many announced policies are in alignment with Chinese national targets for carbon peaking and carbon neutrality. Despite their lack of formal commitments, Chinese banks display remarkable dedication to metrics tracking and green finance making them an outlier in global transition planning trends among the largest financial institutions globally. 69 percent of large Asia-Pacific FIs disclose at least four of the five GFANZ transition planning criteria, including 10 of the 15 Chinese firms in our analysis. Of all the global FIs that meet this transition planning criteria, the only institutions that do not also have net-zero commitments were Chinese.

Standards and frameworks for climate reporting become mainstream

Standards for climate reporting and carbon accounting from the Taskforce for Climate-Related Financial Disclosures (TCFD) and the Partnership for Carbon Accounting Financials (PCAF) are becoming common in financial institutions’ climate disclosures (Exhibit 3). 77 percent of the FIs reviewed used the TFCD framework in their climate disclosures. This framework was especially embraced by North American financial institutions, of which 89 percent formatted their climate disclosures with TCFD standards. 48 percent of financial institutions employed PCAF methodologies to evaluate their emissions activities.

RMI’s Paris Agreement Capital Transition Assessment (PACTA) appeared in 16 percent of the climate disclosures we reviewed, including in one-third of European financial institutions’ documents. PACTA is an open-source, forward-looking sectoral analysis tool that assesses portfolio alignment with net-zero scenarios, enabling financial institutions to identify specific sectoral needs in their portfolios and can help assess the transition performance of clients and investees. Adopting data-centered transition planning approaches like PACTA increases accountability and could drive more informed decision-making and supervision. For example, analysis by the European Central Bank using the PACTA methodology found substantial misalignment with the goals of the Paris Agreement, and elevated transition risk in almost 90 percent of the 95 banks included in the report, covering 75 percent of euro area loans. Frank Elderson, member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, highlighted why this matters: “The misalignment with the EU climate transition pathway can lead to material financial, legal and reputational risks for banks. It is therefore crucial for banks to identify, measure and − most importantly − manage transition risks, just as they do for any other material risk.”

RMI has also developed climate-aligned finance (CAF) frameworks for four key sectors to enable transparency of progress around sectoral climate targets: the Poseidon Principles (shipping), the Sustainable STEEL Principles, Sustainable Aluminum Finance Framework, and the Pegasus Guidelines (aviation). 12 of the largest financial institutions, including 30 percent of the largest institutions in Europe, have adopted one or more of these frameworks.

Exhibit 3.

However, questions remain as to the future of climate reporting, standardization of transition plan guidance, and the credibility of the underlying plans and data. Anecdotally, progress is also being hampered by a combination of commitment fatigue, anti-trust concerns, and lack of bandwidth internally within firms to meet the growing list of regulatory reporting requirements and industry initiatives. Alignment on standards, methodologies, and frameworks facilitate transparency and comparison of financial institutions’ transition plans, providing the foundation for a data-driven approach to transition. However, we need further evidence of whether this disclosure and standardization is helping financial institutions achieve their net zero goals and/or leading to increased investment in priority transition sectors and regions. Efforts to make reporting standards interoperable across regions and guidance on what credible transition planning looks like will be critical, but further consolidation and prioritization are likely needed to find a pragmatic balance between fostering transparency and accountability without becoming a barrier to action.

Transition planning is in progress, but time is short

Over the last year, we have seen exciting progress from financial institutions in transforming their net zero commitments into concrete strategies. However, there is still work to be done. Only 34 percent of the largest institutions’ assets under management ($60.2 trillion) are covered by a formal transition plan. An additional $69.1 trillion sits within financial institutions publishing significant climate disclosures in line with transition planning guidance. We expect some of these companies will announce transition plans and transition finance activities at COP29, but whether these make a splash or demonstrate sufficient progress remains to be seen.

Publishing credible transition plans can ensure that there is internal and external transparency regarding forward-looking strategies to meet commitments that have been made, and act as a focal point for financial institutions’ past and future efforts to support the Paris Agreement. However, lessons from the Asian market demonstrate that even without net zero commitments and official transition plans, enhanced disclosure suggests that support for clients accelerating regional and sectoral transition is increasing.

Regardless of the publication of plans, then, we expect to see increased finance flowing to the transition in the coming months and years. GFANZ published a series of case studies on transition finance, providing some further evidence to this trend – both in transition finance strategies and enabling processes being established as well as capital being allocated. RMI’s Transition Finance Hub will continue to offer updated resources and case studies for financial institutions, researchers, and investors to orient on the state of transition finance.

Such information and knowledge sharing can keep the momentum among the largest financial institutions while much of the attention will be on financing commitments made by governments during COP29. As discussions emerge on linking nationally determined contributions to investment-ready transition plans, lessons on whether and how this can mobilize capital should be explored further and could build upon early adopters in the private finance sector.