Former Bank of England governor Mark Carney has said banks should link executive pay to climate risk management, as part of efforts to align the finance industry with Paris climate goals. Speaking at the UN Environment Programme Finance Initiative roundtable on Tuesday, the former central bank boss said lenders should – at the very least – be transparent over whether or not pay is being tied to climate targets. He said banks must “have some interim objectives and targets that are disclosed. Ideally a governance process that’s clear in terms of … specific board-level governance and responsibility around managing climate risks and opportunities. Ideally, [there should be] some compensation link to that as well, or at least disclosure about whether it is there or not.” While a number of major banks have announced net-zero climate pledges in recent months, few have made explicit commitments about how executive remuneration might play a part in keeping lenders accountable. HSBC and Wall Street giant JP Morgan both revealed climate pledges last week. HSBC committed to achieving net-zero emissions by 2050, linked to the loans and services it provides to clients. It came days after JP Morgan made similar pledges, saying it would push clients towards aligning with the Paris agreement, which is meant to limit temperature rises to 1.5C and avoid the worst impacts of the climate crisis. Barclays announced plans to shrink its carbon footprint to net zero by 2050 earlier this year and Lloyds committed to halving the amount of carbon emissions it finances through personal and business loans by 2030. Neither HSBC nor Lloyds were immediately able to confirm whether executive pay was linked to their climate targets when contacted by the Guardian on Tuesday. JP Morgan said the bank would be announcing its methodology in the spring, and that it has not ruled out linking pay to climate pledges. NatWest Group confirmed that decisions on pay for its top executives – including chief executive Alison Rose – do take climate targets into consideration. The bank has pledged to fully phase out coal financing by 2030 and is aiming to “at least halve” the climate impact of its lending activity by the end of the decade. Barclays’ annual report shows that reducing global carbon emission is one of 16 criteria that helps determine around 20% of executive bonus pay. However, Johan Frijns, director of BankTrack – an organisation that monitors the financial sector – said executive pay was just one way that bankers should be encouraged to avoid a climate catastrophe. “It would be a severe mistake to try to steer bank decision-making on reducing their climate impact solely through getting the right financial incentives or disincentives in place for individual bankers. “If internal motivation to stop financing climate destruction were that shallow we wouldn’t stand a chance. That said, tying executive pay to, say, delivering a credible phase-out plan from the fossil fuel industry, or achieving a steep decline in financed emissions, may well knock a few heads together,” Frijns said. Carney is himself a former Goldman Sachs banker, having worked at the Wall Street firm for 13 years before moving into central banking, first as deputy and then governor of the Bank of Canada, before taking the top job at the Bank of England in 2013. He left in March just before the Covid-19 crisis hit the UK. Carney was one of the world’s best-paid central bankers with remuneration of £882,885 including pension benefits and a housing allowance from the Bank of England during the last financial year. He recently joined Canada’s Brookfield Asset Management as vice-chair and global head of environmental, social and corporate governance and impact investing.