The banking sector’s action to address pollution will be essential in shaping a sustainable path forward.

 

Humanity is facing a triple planetary crisis of climate change, biodiversity loss and pollution. The causes of these crises overlap and exacerbate one another, creating a complex web of challenges that must be addressed in a coordinated manner. Failure to do so threatens the social, economic and environmental viability of all human endeavour. The degradation and collapse of ecosystems caused by pollution of air, soils, fresh water and oceans imposes a substantial cost on society, hinders the achievement of many Sustainable Development Goals (SDG) targets and has serious economic consequences. Addressing pollution requires a comprehensive and coordinated response, with financial institutions playing a key role in protecting our environment and ensuring a sustainable future. Banks and other financial institutions provide the capital that supports businesses and industries, including those that contribute to pollution. At the same time, banks and other financial institutions may also finance pollution prevention and control efforts and technologies, and therefore can be a driver for less polluting practices and the development of sustainable alternatives. This paper serves as a primer for banks navigating the issue of pollution. It first explores the current economic and societal costs of pollution, highlights the double materiality of pollution—namely, both its impacts on society and the environment and the financial risk to companies and financial institutions– and explores the benefits that a transition towards an economy with low levels of pollution represents. While some banks have embraced progressive practices there remains a gap between widely practiced avoidance of banned and highly hazardous chemicals and the elimination of pollution from financing activities across the global banking sector. There is a growing realisation that profitability and sustainability are not mutually exclusive. Indeed, they can be mutually reinforcing. Supporting companies that implement resource-efficient practices and reduce pollution presents banks with a significant opportunity to improve the financial performance of their clients, which can translate into tangible benefits for the banks themselves. Furthermore, sustainable finance, particularly investments in companies, technologies or projects that contribute to environmental sustainability, can potentially generate superior financial returns. This paper provides pollution-related guidance on possible actions by banks under each of the six Principles for Responsible Banking (PRB). The guidelines in the UNEP FI Impact Protocol provide a step-by-step guide for analysing and managing bank portfolio impacts, following UNEP FI’s holistic impact approach and in conformity with the requirements of the PRB and other voluntary frameworks and mandatory regulations.

Banks can proactively address pollution within operations, portfolios and client engagements. By integrating pollution considerations into their strategic frameworks, banks can not only mitigate risks but also seize opportunities to contribute to a healthier, more resilient planet and society. Through actions including active client engagement, banks can manage pollutants and address emerging issues of concern, based on scientific and technical reports from international organisations and local or regional information. To manage impact effectively in their institutional portfolios, banks need a sectorbased approach. Sectors share common challenges in addressing pollution across the life cycle of supply chain activities encompassing design, production, distribution, consumption and end-of-life phases. Moreover, the specific pollution impacts (and hence the solutions) vary widely across sectors, necessitating tailored approaches. This paper examines five high-impact sectors—mining, textiles, electronics, pharmaceuticals and agriculture—providing banks with greater detail on the sectoral-specific impacts, risks and opportunities, including tools and resources that they can apply to tackling pollution. The strategies outlined in this paper serve as a starting point for banks to engage in meaningful change, ensuring that their contributions to pollution reduction are impactful and lasting. As the world continues to grapple with environmental challenges, the banking sector’s action to address pollution will be essential in shaping a sustainable path forward. UNEP FI and its partners will develop more detailed guidance on pollution for banks in 2025, further supporting the sector’s journey to align with the Principles forResponsible Banking and enhance their positive impact on society and the environment.

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