Low ambition and incoherent targets from banks put net zero at risk – analysis

Low ambition and incoherent climate targets from Europe’s 20 largest banks are putting net zero goals at risk, according to an analysis.

ShareAction, which campaigns for responsible investment, scrutinised targets for emissions from financing high-impact activities and for increasing sustainable finance at banks including UK institutions HSBC, NatWest and Barclays.

The campaigners said they found that the banks’ decarbonisation targets are too narrow while their sustainable finance targets are not rooted in robust methodology.

They also concluded the two are not sufficiently aligned with one another.

Looking closer at sustainable finance targets, the analysis showed that 18 out of 20 banks are not on track to meet the 10 to one dollar ratio of green to fossil fuels investment that the International Energy Agency says is needed by 2030.

These include HSBC, Barclays and BNP Paribas.

Just NatWest and Nordea can realistically be expected to meet this milestone based on the sustainable finance targets they have set, it found.

ShareAction also warned that banks are inconsistent in their approach to target-setting, making it difficult for the public, regulators and investors to judge the real impact of their climate action efforts and be able to hold them to account.

It said even some of the largest, most ambitious-sounding green finance targets are in reality very small relative to a bank’s size.

For example, HSBC’s goal of up to one trillion dollars towards sustainable investment by 2030 accounts for just 1.8% of its total assets, while Barclays’ is just 3.2% of its total assets, it said.

And while almost all decarbonisation targets by banks are based on a clear methodology, just 13% of sustainable targets are backed by transparent, public methodology, it added.

Xavier Lerin, senior research manager at ShareAction, said: “Europe’s biggest banks have a vital role to play in financing the transition to a low-carbon economy, such as scaling up renewable energy, making real estate energy efficient and supporting important industries to decarbonise.

“However, our analysis shows that, in the majority of cases, the climate targets banks are using as a road map to transition are not fit for purpose, which is putting at risk our ability to protect society from the worst impacts of climate change.

“We urgently need banks to set more ambitious and coherent targets that transparently map out how they will live up to their commitment to finance the renewable power, green infrastructure and technologies needed to protect people and our economies.”

Ian Bhullar, head of sustainability policy at UK Finance, said: “The transition to a net zero economy is a key priority for the financial services industry.

“Strong policies to support low-emissions technologies and sectors is the best way to give certainty to lenders and investors.

“This in turn will encourage finance to go where it is needed.

“Governments can help unlock more finance by setting out clear road maps detailing the long-term approach to infrastructure and key sectors for the transition.

“At last year’s Cop summit, we saw important commitments made regarding the transition away from fossil fuels, renewable energy capacity and energy efficiency.

“We know there is still work to be done, and we look forward to continuing these vital discussions at Cop29 this month.”

A Barclays spokesman said: “We agree that the financial sector has an important role to play in supporting the transition to a low-carbon economy, recognising also that building a new energy system that provides clean, reliable and affordable energy won’t happen overnight.

“Barclays is committed to providing the finance to meet current energy needs while financing the scaling of clean energy.

“Barclays is delivering against its target to facilitate one trillion dollars of sustainable and transition finance by 2030 – a larger target than many peers, when viewed relative to total assets.

“Barclays also has science-based emission reduction targets for the highest emitting sectors, including energy and power.”

The PA news agency has contacted HSBC, BNP Paribas and NatWest for comment.