JPMorgan Chase is currently committed to financing US$1 trillion in climate initiatives by the end of 2030. Yet in 2024 alone, it invested US$53.5 billion in fossil fuel companies – a figure that exceeded its renewable energy financing for that year. It was not a case of a single rogue decision; rather, a collection of high-carbon investments displaced green projects that aligned with the bank’s stated climate commitments.

The JPMorgan Chase example points to a pattern across the banking sector: structures and processes within banks – how deals are assessed, how staff are rewarded, and how authority is distributed – influence banks’ decisions to fund climate-related initiatives in ways that work against their achieving the climate targets they have endorsed.

This paradox and why it endures was the subject of a study by researchers at UNSW Sydney. Their conclusion may surprise: the gap between what banks say about climate and what they do about it is, at its core, a problem of how they manage their people.

The trillion-dollar contradiction in climate finance

A recent ShareAction report revealed that Europe’s biggest banks had channelled more than $400 billion into oil and gas expansion since 2016 – in some cases in ways that ran counter to their own climate pledges. Banks in the United States, Australia and China followed a similar pattern.

Banks decide where different kinds of capital should flow: From green bonds to sustainability-linked loans, the finance sector has made significant commitments through frameworks such as the Net-Zero Banking Alliance and the Principles for Responsible Banking.

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The research paper, Can we bank on it? Aligning human capital and climate finance within the workplace, published in Personnel Review, revealed a disconnect running through the inner workings of these institutions. As the authors noted, “a persistent and underexamined contradiction remains: while at the level of public discourse banks are increasingly promoting an agenda of climate action, their internal systems of decision-making, incentives and performance often remain anchored in short-term financial logic.”

In practice, this means that people inside banks who make decisions on capital allocation are measured and rewarded by the size and profitability of their deals, not by climate outcomes. Climate targets sit elsewhere, often in teams with limited authority.

Why climate strategy is a human resources problem

The UNSW research argues that climate governance cannot succeed as a compliance exercise alone. It must be embedded in the systems that shape how people work. The paper advances a framework built on four dimensions: governance type, decision-making structure, disclosure integrity and workplace impact.

The study was authored by UNSW Business School PhD student Aditya Prakoso, and by Professors Gavin Schwarz and David Grant from the School of Management and Governance at UNSW Business School. The team developed a framework to examine how climate strategy is “translated, distorted or deflected inside financial institutions,” and how it maps onto the workforce. “Our findings indicate that HR in the banking sector has a vital role to play; one involving its promoting not only financial success but also climate resilience,” said Prof. Schwarz.

“This involves HR being at the vanguard of efforts to move banks’ behaviours in respect of climate action, beyond those geared towards mere compliance. Specifically, it involves a commitment to aligning recruitment, job design, performance assessments, and leadership accountability with sustainability objectives and integrating these objectives into the company culture. In short, HR professionals need to serve as agents of change, fostering sustainability through initiatives that strengthen climate governance.”

When sustainability leaders are set up to fail

The paper pointed to a case in point. In 2024, HSBC removed its Chief Sustainability Officer, Celine Herweijer, from the executive committee during a leadership reshuffle – a move that reportedly contributed to her resignation. The researchers cite this as an example of sustainability roles remaining “peripheral and precarious” when they conflict with the priorities of revenue-generating units.

This type of situation, the study authors describe, creates a workplace in which staff in sustainability roles hold responsibility with limited authority. They were expected to deliver on climate targets while performance systems continued to reward opposite behaviour. The result is “fragmented accountability, role ambiguity and employee disengagement.” ESG teams, the paper notes, are often positioned as advisers rather than decision-makers and their influence over decision-making is often limited to instances where it does not conflict with profit-making.

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“The study concludes that, from a workplace governance perspective, sustainability in banks is all too often seen as a collective duty without clear accountability,” said Prof. Grant, who also serves as Senior Deputy Director at the UNSW Institute for Climate Risk & Response. “Achieving climate goals seems disconnected from individual responsibilities and incentives and is undermined by an absence of clear mandates for action, attributed, in part, to a lack of support from those in positions of authority. In short, sustainability is seen as a performative function rather than as a core element of operational governance.”

Three steps banks need to take to close the gap

The paper outlines three interventions. The first is regulatory evolution – moving beyond voluntary frameworks to enforceable climate disclosure, including for financed emissions (the downstream carbon impact of the economic activities banks fund through their lending, underwriting and investment portfolios). In Australia, recent Federal legislation implementing a phased mandatory climate disclosure regime is cited as a step in this direction.

The second is internal alignment. This means integrating climate performance indicators into banks' promotion criteria, reward systems and credit approval processes. Climate teams, the researchers argue, must hold authority to influence lending decisions, not simply advise on them. Job descriptions, they note, “must evolve to reflect the new technical and ethical demands of climate finance”.

The third is a cultural shift. The paper argues that climate goals must move beyond strategy documents and become part of how the organisation operates day to day, shaping how teams collaborate and how employees understand their institution’s purpose. This requires changes to recruitment, training and leadership development.

What this means for business leaders in finance

The message from this research is clear and confronting. Banks that treat climate strategy as a communications exercise while their internal systems reward the opposite behaviour face growing risks, to reputation, workforce engagement and talent retention.

The researchers conclude that “the banking sector has the analytical capability, the financial power and the global influence to lead climate transition. The challenge hinges on their willingness to confront the internal contradictions that have too often been ignored.” For HR and business leaders in finance, the takeaway is that climate targets must connect to how people are hired, assessed and promoted. Without that link, sustainability commitments will remain, as the researchers put it, “articulated but not embedded, symbolised but not enacted.”

“Banks that continue to behave in this manner do so at their own risk,” Prof. Grant concluded.