In mid-year climate talks between 197 nations this past week in Bonn, Germany, there have been calls from both wealthy and developing countries for clear, agreed guidance to support mainstream banks, large and small, in starting to act as climate banks. This is a critical stop toward activating the mandate of Article 2.1(c) of the Paris Agreement, which calls for “Making financial flows consistent with a pathway towards low greenhouse gas emisisons and climate-resilient development.”

The language was crafted to both allow for flexibility of interpretation, to account for the many diverse circumstances in which financial flows–essentially any financial activity crossing a border, or in the views of many, moving between any entities or activities in the everyday economy–might improve or worsen future living conditions. The common reading of the Article 2.1(c) is that all money should eventually do more to benefit climate resilience than to undermine it. The common shorthand for this goal is “aligning all finance”. 

Climate banking is a critical step, because without it, climate-related financial activities will remain a harder-to-access niche area of activity, and the everyday economy will be deprived of resources, opportunity, returns on investment, and critical data to drive the development of new business models attuned to the coming resilience economy. 

One of the calls we have heard this week–both from developing countries and from potential donor countries interesting in getting transition assistance and resilience funding to local communities–is for language to be agreed recognizing the need to support climate-related finance moving through local banks. 

• This includes calls for support for capacity building to develop specific climate-related skills and operational capacities related to climate intelligence (data), including but not limited to MEL (monitoring, evaluation, and learning), and the deployment of capital to support innovative climate risk reduction and resilience-building activities. 
• Discussions have also pointed to the need for innovative micro-scale financial enterprises, in the public, private, and philanthropic sectors, to support teams of 1-10 people, smaller than small-scale local and regional ventures, delivering reliable micro-scale data and financial services that can boost climate-resilient economic development.

Technology transfer is part of this effort to boost local climate banking activity. 

• Even in advanced economies, many commercial banks do not routinely utilize or integrate the technologies that would make it possible to understand or invest in the climate benefits of specific local business activity. 
• In many developing countries, those technologies could not be mainstreamed without additional financial support or grant-based technology access arrangements, making climate intelligence tech available for everyday use. 

Co-investment strategies, including cooperative de-risking, are also getting recognition in Bonn. Across the finance-related discussions, we are hearing calls for more flexbile, more accessible, and more diverse forms of “blended finance”, with co-investors finding support from public agencies and multilateral development banks for specific climate benefits. 

Here, again, technology is a core part of the conversation, as both distributed ledger technologies (the foundation of cryptocurrencies) and artificial intelligence create new opportunities for value-building data systems integration, while also creating the risk of unintended distortions leading to real-world harm. For climate banking to become an everyday practice, whether in large transnational banks or in micro-scale innovative enterprises, the human impact of technology-related decisions must be a central, priority, and paramount consideration. 

We have also heard important insights relating to the potential secondary risks or co-benefits of climate banking: 

• Building climate considerations into everyday banking and local business greatly extends the market for climate-smart finance and investment, creating a potential boom economy that is not a bubble, but a necessary, ongoing concern. 
• The climate intelligence emerging from that everyday practice could also help to provide meaningful practical definition to key terms where precise consensus is elusive: successful adaptation, risk, resilience, disaster, climate-induced involuntary displacement, ecosystem health or breakdown, and climate-resilient food systems, to name just a few. 
• An imprecise or overly permissive approach to commercial use of climate data to condition lending and investment could have the unintended consequence of incentivizing maladaptation or creating new cycles of boom and bust for communities affected by extractive activities. 

The Principles for Responsible Banking provide something of a thought framework for developing a climate-smart banking strategy. We paraphrase the principles here, for context:

1. Align business strategies with the needs of clients, society, and overall sustainability, including global climate goals.
2. Reduce negative impacts and improve performance through public target-setting informed by science.
3. Support clients and customers shifting to more sustainable practices that create shared prosperity for current and future generations.
4. Consult, engage, and partner with stakeholders to achieve social, sustainability, and climate goals.
5. Enact governance and culture change to embody these principles in ongoing institutional practice.
6. Offer transparent reporting of and be accountable for progress, or lack of progress, on social, sustainability, and climate goals.

In our Climate Banking Innovation Dialogue, we have opened an ongoing discussion around 10 core questions: 

1. Can local commercial banks provide climate-linked financial support to local actors (homeowners, businesses, municipalities, etc.)? 
2. What are the implications of climate impacts on local and regional insurance markets, and how does that affect banking services? 
3. Are incentives already available that reward climate-sensitive planning, investment, and related services, which might support climate banking? 
4. Can banks provide intermediary services, including climate science data translation and measurment of professed climate benefits?
5. Should public authorities support the incubation and development of ecosystems of small-scale climate service providers, to provide a foundation for climate banking? 
6. If international climate finance flows can move directly to communities and support locally led initiatives, can banks play a role in managing those financial flows?
7. Are specific sectors—like agri-food or infrastructure—better attuned to climate-related financial arrangements? What does this mean for policy? 
8. Can nations better position themselves in the landscape of climate-conditioned trade by incentivizing the emergence of climate banking?
9. Can local climate banking services enhance the accumulation and cross-referencing of climate adaptation and resilience value assessments? 
10. Are there digital technologies that make it possible for banks to support individual management of climate-positive money in day to day transactions?

Each of these questions points to a vast landscape of innovation, risk, and opportunity, with potential life-changing impacts for people, communities, and industries. It is our hope that ongoing negotiations around the future of climate finance consider these potential impacts and work toward the best possible future of safety and wellbeing for people on all variety of country and community contexts.