Europe’s top banks failing on net-zero pledges

While 20 of Europe’s 25 largest banks have committed to net-zero emissions by 250, none of them have matched these long-term pledges with comprehensive plans to avert climate change, new research has found.

A recently published report from responsible investment watchdog ShareAction analysed the leading practices by European banks across eight critical climate-related areas, including net-zero targets and high-carbon disclosures.

It revealed that even though some banks are demonstrating leadership on specific issues, none have an all-inclusive plan to tackle all sustainability challenges.

“Our research shows that there is a large disparity between the credentials of leaders and laggards on each environmental issue,” said Xavier Lerin, senior banking analyst and author of the report. “There is no excuse for banks which have not yet adopted the leading practices of their peers, though it should also be noted that, in many cases, even the leading practices in the sector continue to fail basic litmus tests on climate and biodiversity.”

Lerin added: “Moreover, no bank demonstrates leading practice on all issues. As such, there is a huge amount that all banks can do right now to address their environmental impacts and we call on them to publish credible climate and biodiversity strategies ahead of COP26.”

According to ShareAction, of the top banks that have pledged to zero-out emissions in the next 30 years, very few have started taking concrete steps to achieve this goal.

It said that only three banks - Lloyds Banking Group, NatWest, and Nordea - have committed to halve their financed emissions by 2030 to ensure they are on track to meet their 2050 target.

Eight banks have set interim targets for the most carbon intensive sectors, but only three of them - Barclays, Crédit Agricole, and NatWest - use an absolute emissions metric or complement their targets with additional financed emissions disclosures to ensure their targets lead to an actual decrease in emissions.

The research also showed that even though 65 per cent of banks’ fossil fuel financing comes from capital market underwriting, only Barclays currently covers these activities in its targets.

Meanwhile, less than half of the 25 banks have committed to a phase-out of financing to thermal coal-related activities. The policies that do exist are full of “loopholes,” said ShareAction.

Only seven banks restrict corporate finance for companies developing their coal mining capacities, while just one bank - Crédit Mutuel - has implemented both relative and absolute thresholds for the coal power and mining sector in line with the Global Coal Exit List recommendations.

Many banks have claimed they are exiting certain unconventional sources of oil and gas, such as that extracted from the Arctic, only one bank - Intesa SanPaolo - has committed to phasing out its exposure to all unconventional oil and gas sources, including oil sands and fracking.

The report demonstrates that while most of the leading European banks also place some degree of restriction on current financing for unconventional sources, they retain substantial exposure to these activities through corporate finance for diversified companies such as oil majors.

ShareAction warned that even though most financial institutions are taking steps to address climate change, the sector’s approach to the threat of biodiversity loss is “still in its infancy.”

Only ten of the top 25 banks have a biodiversity policy.

Rabobank goes further than most by setting ‘expectations’ for clients, that they should not operate in protected areas or damage high conservation value forests. But these expectations do not explicitly prohibit clients from operating in these areas, which the organisation said limits the impact of the bank’s policy.

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