Just 3 in 10 UK banks have a net-zero target, PwC claims

A survey of 17 of the UK's largest banks has found that just five of them have net-zero targets or science-based emissions targets, meaning they risk breaching their legal requirements on climate change.

Green finance and dimensions of financial risk have been key talking-points in the wake of Covid-19

Green finance and dimensions of financial risk have been key talking-points in the wake of Covid-19

The banks and building societies were assessed by PwC, as part of its latest analysis on climate risk in the financial sector.

PwC chose the banks on the basis that they are regulated by the Prudential Regulation Authority (PRA), which has several requirements in its 2020-2021 business plan concerning the physical and transition risks of the net-zero transition – and the risks of inadequate action on climate adaptation and mitigation. These requirements are summarised by a mandate for banks to “fully embed their approaches to managing climate-related financial risks by the end of 2021”.

Seven in ten of the banks surveyed said that they have already embedded climate risk considerations in their long-term strategy, with the vast majority confident that they will meet or beat the PRA’s deadline.

But just five of the businesses have publicly announced net-zero targets or science-based targets which match or exceed the UK’s national long-term climate goals. Included in this list are Barclays and NatWest Group, formerly RBS.

Moreover, eight of the banks are yet to conduct scenario analysis on their current portfolios. Recommended by the Task Force on Climate-Related Disclosures (TCFD), scenario analysis helps organisations to track what their risk profiles would look like under varying degrees of warming, including the Paris Agreement’s 2C trajectory.

The Bank of England’s climate risk stress tests will conduct scenario analyses on the UK’s largest banks, as well as the broader national finance system. And, under the Green Finance Strategy, TCFD-aligned disclosures will be mandated for many organisations in the financial sector in the coming years.

As such, PwC is warning that many banks are unprepared both for upcoming changes to legislation and regulation, and for the broader, long-term impacts of the climate crisis.

“Both the Bank of England and the Prudential Regulation Authority have clearly set out that climate change brings financial risks that need to be managed now,” PwC UK’s partner for sustainability and climate change Jon Williams said. “However, our survey shows that even though there remains a great willingness to address this issue, more needs to be done to turn this into feasible action. 

“Respondents told us that a lack of data is a key challenge in correctly understanding the possible climate-related risks and although it’s clear that respondents are looking ahead to develop a strategic approach to climate risk they first need to build the foundations, and time is running out.”

Regulation and legislation

Earlier this week, the Investment Association (IA), which represents investors with more than £8.5trn in assets under management, urged regulators and ministers to make TCFD-aligned reporting mandatory for the UK's biggest publicly listed businesses.

The UK Government has said it will mandate TCFD-aligned disclosures for certain large organisations within three years, under its Green Finance Strategy. Its finance strategy for COP26 includes plans to help businesses prepare for disclosure, alongside warning that stricter requirements on which organisations are required to disclose could come soon. But with the conference delayed by a full year, these resources have not yet been publicly launched.

Sarah George



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