2025 Financial System Benchmark

There are around $200 trillion of investible assets across the global financial system, affecting the decision-making of businesses and the lives of billions of people. Although they have the power to drive impact at scale there is limited evidence this is being realised. Whilst over 60% of institutions assessed assign responsibility for implementing sustainability across their organisations, only 1% have an evidence-based strategy linking financing activities to material impact. Sustainability having greater prominence, especially at an executive and board level is welcome, the link between their financing activities and real-world change is still painfully low.​

Institutional investors are critical to closing the funding gap of nearly $4 trillion a year for sustainable development in emerging markets. Too few financial institutions, especially those outside these regions, recognise their responsibility in supporting capital flows for sustainable development. Only 6% of institutions expressed financing support to low and lower-middle income countries. Visibility on SDG-related finance remains extremely low across key environmental and globally agreed social topics. However, institutions show more activities to support SMEs and to some extent, climate-solutions. A global norm is needed to provide clear guidance on the financial system’s responsibility to create momentum and drive innovation so capital reaches under-represented groups – be they people, businesses or countries.

Finance is critically needed to fund the energy and climate transition and is a powerful lever influencing industry. Despite this, only 3% of financial institutions have transition plans in place. There is a severe lack of transparency of financial institutions’ plans for phasing out the financing of fossil fuels and redirecting investments to alternative solutions. Banks alone have financed fossil fuel by nearly US$7 trillion since the Paris Agreement, yet the estimated $6 trillion needed annually to finance the climate transition will remain out of reach under business as usual. Additionally, Just Transition planning is also an imperative for success. Transition planning by the financial sector is essential for the business sector transition.

Given that over 50% of global GDP relies on nature, financial institutions have started paying attention to the systemic risk its loss poses to global financial, environmental and social stability. Our assessment shows that 1 in 10 institutions across the global financial system are identifying the impact of their financial activities on nature. Whilst this shows the green-shoots of momentum, our findings also reveal how nascent the issue is compared to climate action within finance. The lack of knowledge on how to address their impact through their financing activities is reflected in the finding that only 2% of institutions have a strategy in place to manage it.

The responsibility of finance to respect workers’ rights indirectly through their financing activities is increasingly aligned with reputation protection, customer loyalty and attracting employees. However, despite decades of discussion and commitments to global principles, very few financial institutions disclose their processes on assessing human rights risks from their financing activities. While 25% of institutions commit to protect workers’ rights and livelihood, only 6% actually disclose a process for doing so. Voluntary due diligence disclosures are insufficient to protect workers from businesses that extract profit at all costs, regardless of the long-term risk to society. It is time for mandatory disclosure that aligns both business and finance.