Report Finds Two of 400 Financial Institutions Have Credible Fossil Fuel Phase-Out Plans

A new analysis by the World Benchmarking Alliance found that only two of 400 major financial institutions have credible commitments to phase out fossil fuels. The report also determined that one third of the institutions are setting metrics and targets or embedding transition plans within governance structures.

Among institutions with transition plans, around a quarter have embedded short-term climate solutions financing targets aligned with the pathway. The report identified regional differences, with Europe and Central Asia showing the highest share of institutions with transition plans covering financial activities at 60 percent.

North America recorded the lowest prevalence of such plans at 18 percent.

The report stated that credible transition plans need to include ambitious targets and a clear commitment to phasing out financing of fossil fuel activity. It added that capital allocation and fossil fuel phase-out remain far behind what is required for an orderly economic transition.

Pauliina Murphy, the WBA’s engagement and communications director, said financial institutions could play an unlocking role by phasing out investments in fossil fuels and encouraging other sectors to follow suit. Murphy added that many institutions are not acting decisively enough or are still investing through the lens of profitability rather than long-term transition plans.

She said global financial architecture systems, including governing and regulatory authorities, also need to adapt with greater emphasis on transition planning.

Expert Assessments Dr.

Jesse Abrams, a climate risk specialist at the University of Exeter, said the report’s findings show the financial sector remains dramatically exposed to the transition risks it needs to manage. He added that fossil fuel volatility is already generating economic instability today.

Stefano Pogutz, a professor of practice in corporate sustainability at SDA Bocconi School of Management, said a broad architecture of disclosure frameworks has pushed the financial sector toward climate awareness but not enough toward actual portfolio decarbonization.

Pogutz stated that the key climate footprint for financial institutions is what their lending, underwriting, and investment portfolios enable in the real economy.