Banks and Climate Governance

Abstract

Major banks in the United States and globally have begun to assert an active role in the transition to a low-carbon economy and the reduction of climate risk through private environmental and climate governance. This Essay situates these actions within historical and economic contexts: It explains how the legal foundations of banks’ sense of social purpose intersect with their economic incentives to finance major structural transitions in society. In doing so, this Essay sheds light on the reasons why we can expect banks to be at the center of this contemporary transition. This Essay then considers how banks have taken up this role to date. It proposes a novel taxonomy of the various forms of private environmental and climate governance emerging in the U.S. banking sector today. Finally, this Essay offers a set of factors against which to normatively assess the value of these actions. While many scholars have focused on the role of shareholders and equity in private environmental and climate governance, this Essay is the first to position these steps taken by banks within that larger context.

Keywords: climate change, private environmental governance, private climate governance