How 'green' are the world's banks?

Some of the world's top financial institutions are starting to think of green as something other than cash.

They are adding chief environmental officers, committing themselves to sustainable-energy projects, and reducing their greenhouse-gas emissions. In a sense, many of them are going from wingtips to green sneakers.

Turning the bankers into budding Al Gores has significance because of their impact on financing and investment, not to mention that they have considerable real estate holdings.

On Thursday, a new analysis of the top 40 financial institutions found that while no one will mistake the money powerhouses for the Sierra Club, many of them are making "encouraging progress."

"It's a new focus area for the banks. Four years ago this was inconceivable," says Mindy Lubber, president of Ceres, a coalition of investors and environmental groups, which released the report. "This could have a profound impact because the banks are now becoming a part of the solution."

On a scale of zero to 100, the top-ranked bank, London-based HSBC, had a score of 70. According to the report, the changes the bank has made include an environmental oversight committee on its board of directors, a chief environmental officer, and the purchase of 40 percent of its energy needs from renewable sources.

The bank has spent $90 million to improve its energy efficiency, said Jon Williams, head of global sustainability development for HSBC, at a press conference Thursday. The bank is also investing $100 million in a partnership with four environmental groups. One partner is training 250,000 employees on climate change – some of whom will help the bank's clients as "experts."

The highest-scoring US banks are Citigroup with 59 points and Bank of America with 56 points. In May 2007, Citigroup announced a $50 billion commitment over 10 years to address global-warming issues.

Bank of America has made a $20 billion commitment over the same time period. It has set a goal of reducing the growth rate of carbon emissions associated with its lending by 7 percent this year compared with the growth rate in 2004.

"This is the type of trend we want to see," says Ms. Lubber. But, she adds, no banks have said yet that they won't finance coal-fired power plants.

According to the report, which is by Douglas Cogan of the RiskMetrics Group, some of the positive steps banks have taken include:

•Nearly 100 research reports on climate change and regulatory and investment strategy have been issued.

•Twenty-eight of the banks have calculated their own greenhouse-gas emissions, and 24 have set an internal reduction target.

•Twenty-nine of the banks are supporting alternative energy projects.

•However, more than half the banks rated under 50 points. The median score was 42. The worst rankings for diversified banks went to the Bank of China, scoring 4 points, and Industrial Bank of China, with a score of 8.

In some cases, the scores may reflect only public information, since not all banks responded to the survey.

Some of the negative findings of the report were:

•Only 12 banks have board-level involvement. Only one of those is a US company.

•Only six banks are calculating carbon risk in their loan portfolios.

The aim of the report, says Lubber, was not to point fingers but to provide financial institutions with a blueprint of "best practices."

Even before the report gets much press, it's already having an impact. For example, Ceres gave the investment banker Bear Stearns a zero rating since the company did not respond to requests for information or have any material in its annual report.

"So far as we can tell, they have no policy, no board members responsible for climate change, and no metrics," says Lubber.

Yet the investment bank is proud of its new "Energy Star-labeled" building, says Monica Orbe, a spokeswoman for the bank. "I know it's very energy efficient," she says, "because when I don't move for three minutes, the lights go off."

Bear Stearns intends to participate in the survey in the future, Ms. Orbe says.