WWF: UK banks and investors financing projects with double nation’s climate impact

The report reveals the extent of strings-free financing to high-emitting sectors

That is according to a major new analysis from WWF and Greenpeace UK, published this morning (25 May).

The analysis covers the financial activities of 15 large banks and 10 large asset managers with UK operations, assessing their Scope 3 (indirect) emissions from financed activities using the frameworks provided by the GHG Protocol and the Partnership for Carbon Accounting Financials (PACF).

Collectively, the activities of these organisations accounted for CO2e emissions 1.8 times higher than the UK’s national figure in 2019. Many of the banks and investors, the report claims, are still funneling millions or even billions into high-carbon sectors such as oil and gas, coal, aviation, road transport and mining, without environmental ‘strings’, despite a trend towards updated climate targets.

Banks assessed for the report are Barclays, CitiGroup Global Markets, Credit Suisse International, Credit Suisse Investments UK, Goldman Sachs Group UK, HSBC, JP Morgan Capital Holdings, Lloyds Banking Group, Merrill Lynch International, Morgan Stanley International, Nationwide, Nomura Europe Holdings, NatWest Group (formerly RBS), Santander UK and Standard Chartered.

Assessed investors are Legal & General Investment Management, Schroders, HSBC Global Asset Management, M&G Investments, Ballie Gifford, Royal London Asset Management, Man Group, Aberdeen Life Assessment, Insight Investments and Aviva Investors.

The NGOs behind the new report are calling for tougher regulation to accelerate climate ambition and action in the finance sector, including enhanced disclosure requirements.

Specifically, the report outlines how nations with net-zero targets, including the UK, could mandate financial firms to cut financed emissions by 45% by 2030, against a 2010 baseline. This is in line with the Intergovernmental Panel on Climate Change’s (IPCC) landmark 2018 report.

Greenpeace UK and WWF want to see this requirement introduced ahead of COP26. This could apply on a ‘comply or explain’ basis, with businesses mandated to forecast different temperature pathways for investments.

“Trying to set a path to net-zero emissions without tackling the UK financial sector is like sticking a plaster when the patient needs open-heart surgery,” WWF UK chief executive Tanya Steele said.

“The UK financial sector could be the first in the world to be aligned with the Paris Agreement targets – and reap the rewards as global business shifts towards clean, green investments. But it’s clear voluntary pledges aren’t getting the job done. The UK Government must show the global leadership expected of the COP26 Presidency and commit to mandating all financial institutions to have net-zero transition plans that cover their investments in every corner of the globe.”

Policy progress

The UK Government’s policy changes for the financial sector since the 2050 net-zero target was enshrined in law have included mandating climate risk disclosure for certain firms, in line with the Task Force on Climate-Related Disclosures (TCFD) recommendations, from 2022.

However, many green groups have argued that more must now be done. There was, specifically, disappointment that the recent Pensions Bill did not mandate schemes to divest to deliver net-zero-aligned portfolios. Criticism also continues to be voiced about the climate remits and requirements of the Bank of England and newly created National Infrastructure Bank (NIB).

With more nations setting new climate targets ahead of COP26, the question as to how international green finance laws will change elsewhere remains open. US President Joe Biden pledged in his election manifesto to double climate funding – a proposal that is reportedly not going down well among the Republican Party – and to improve climate risk disclosure requirements.

As for the UK’s COP26 unit, the organisation has selected Climate Finance as a key theme for the conference. Mark Carney is Finance Advisor for the summit and is heading up the ‘Glasgow Financial Alliance for Net-Zero’ (GFAN). The initiative will bring together banks, asset manager, asset owners, insurers and other providers of financial services in a network designed to unify and strengthen climate ambitions across the sector. Organisers are hoping to bring together 160 firms in the first instance.

Domestic policy should be clarified through the upcoming net-zero roadmap. Due ahead of COP26, the roadmap will provide sector-specific guidance on the low-carbon transition, including time-bound goals and technology advice.

Sarah George

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