Banks should be made front and centre in government climate policy to promote corporate responsibility and encourage capital flow to alternative energy markets, according to research by a Victoria University academic.
Lecturer in Law and research associate to the Center for Strategic Economic Studies, Megan Bowman, said the banking industry made decisions with indirect climate consequences every day and was well placed to enroll other corporate actors in greenhouse gas mitigation efforts.
"The day to day activities of banks – financing, lending, investing and advising – bring them into direct contact with large corporations that are not only responsible for fossil fuel distribution and intensive carbon emissions, but also for renewable energy and clean tech initiatives," Ms Bowman said. "However, to date, the role of the banking industry in helping to mitigate climate change has garnered little attention by academics or policymakers."
In a recent article in the International Journal of Global Energy Issues Ms Bowman calls for government-regulated financial incentives to "nudge the banking industry in the right direction" towards investment in clean and renewable technology.
"These incentives could take the form of tax breaks or guarantees, for example, mechanisms that offset upfront investments in clean tech in order to make it attractive. They need to be stable and long term in order to encourage private funding and business activity in renewable and clean tech sectors," Ms Bowman said.
"In this way, incentives can enlarge these markets to enable deployment of alternative energy sources on a similar scale to that of fossil fuels."
Banks had the reach, influence and financial firepower to unleash mature green technologies globally in the same way they had previously supported the internet and cellular networks, she said.
"But right now they also have competing business case reasons to keep supporting fossil fuel-related initiatives. That needs to change; and it won't happen on its own," she said. "As a whole, the banking industry is only just beginning to understand the risks and opportunities of climate change for banking business so now's the time for well-designed incentives to make those options more attractive, more quickly."
Since the 2008 global financial crisis, intense scrutiny has been directed at how banks do business and social pressure has increased around the world for 'responsible' banking practices.
"Regulation that incentivises capital into clean tech and renewables markets marries the banking industry's business case motivations to 'make money' with recent heightened corporate and social sensitivities for banks to 'make good'," she said.
Ms Bowman is currently undertaking a PhD on this topic.