Rethinking Bank Engagement: Aligning Lending Practices with the Net-Zero Transition

Unlike investors, banks influence corporate behavior through distinct tools: lending, underwriting, and advisory relationships. But their role in enabling — or impeding — corporate transition has received less focused attention in the climate finance landscape. This project reconsiders how banks can meaningfully assess client transition planning, apply financial levers, and use their relationships to promote credible climate action.

Supported by the Wells Fargo Foundation, the Climate Law & Finance Initiative (CLFI) — a joint effort of CCSI and the Sabin Center for Climate Change Law — launched a cross-cutting research and engagement initiative to explore how banks are engaging with clients in support of the net-zero transition. Our project combines practical research, industry consultation, and workshop engagement to help banks and policymakers better navigate transition finance and borrower alignment.

Key Themes

Rethinking Banking Engagement

• Bank-client relationships differ fundamentally from investor-company ties.
• Engagement occurs not only at the point of lending but across the full credit lifecycle — through product design, syndication, refinancing, and underwriting.
• Workshop discussions explored climate-related covenants, lender governance, and the role of syndication and commoditization.

Transition Plan Assessment

• Despite widespread adoption of frameworks, transition plan assessments remain fragmented across major banks.
• Emissions data dominates evaluations, but most banks lack consistent review processes or integration of CAPEX and business model metrics.
• Sectoral assessments are often narrowly focused on high-emitting industries, overlooking risks and opportunities in others.

Authors

Perrine Toledano

Director of Research and Policy

Ana Maria Camelo Vega

Senior Economics and Finance Researcher

Themes

• Sustainable Business
• Sustainable Finance