THE ROLE OF COMMERCIAL BANKS IN CLIMATE CHANGE AND ENVIRONMENTAL SUSTAINABILITY

Commercial banks play a critical role in shaping climate change outcomes through their financing choices. This study analyzes their contribution to environmental sustainability between 2015 and 2023, focusing on fossil fuel funding, green finance instruments, and regulation. Results show that fossil fuel financing remains dominant, reaching USD 5.5 trillion in 2023, while green bonds and sustainability-linked loans have grown rapidly but still at smaller scales. Regional differences are significant: European banks cut coal exposure by 45%, compared to 12% in the U.S., underscoring the stronger impact of regulation. EU stress tests further reveal banks’ limited resilience to climate risks. The findings suggest that banks must move beyond pledges and adopt robust regulation, transparency, and risk integration to act as genuine agents of sustainability.