Letter to the Global Reporting Initiative on the Sector Standard Project for Financial Services

To Whom it May Concern:

The American Bankers Association (ABA) appreciates the opportunity to provide comments on the Global Reporting Initiative's (GRI) exposure draft related to its GRI Sector Standard Project for Financial Services – Banking. Our member institutions recognize the current importance of sustainability-related information and are committed to providing decision-useful disclosures to stakeholders. However, as they relate to information in the financial services industries, we have significant concerns about the framework in which voluntary disclosure standards are developed and eventually used.

Stakeholder Education is Needed Related to Financial Sector Transition and Risk

Given the growth in interest worldwide in sustainability-related information, GRI should initiate education-related programs to inform stakeholders of how such information should (and should not) be used. During certain stakeholder events related to climate disclosures, ABA has noted, for example, ignorance related to the limitations banking institutions have in driving macroeconomic transitions, as well as their ability to cause changes in specific customer operations. To be clear, banks are financial intermediaries that facilitate the flow of funds between lenders (in most cases, they are savers) and borrowers. On their own, financial intermediaries have little ability to effectively force economic transition in a safe and sound manner. In the context of a transition to a low-carbon economy, banks' primary role is to support their clients by financing the real economy transition activity of those enterprises. Banks are unable to dictate or otherwise compel transition activities by their customers. The demand for such transition financing is then largely contingent on external factors such as governmental policies and related incentives, technological advancement, and the market forces that can affect consumer preferences.

Due to these dynamics, financial institution transition plans and their financed and facilitated emissions targets are not achievable on their own. To drive progress on achieving climate- and nature-positive outcomes, government policies must not only clearly set expectations for actions across geographic locations and economic sectors but also provide incentives that enable these real economy activities to be economically viable, especially in industrial sectors with high levels of impact and/or dependency.

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