New analysis has exposed what looks like unambitious and incoherent climate targets at Europe’s richest banks.
This means these lenders are unlikely to succeed in shifting enough financing away from fossil fuels and towards renewable power, green infrastructure and technologies at the speed and scale needed to prevent a dangerously overheated world.
The research by responsible investment campaigner Share Action, which analysed targets for reducing emissions from financing activities and those for increasing sustainable investment, found that overall banks’ decarbonisation goals are too narrow.
They also discovered that their sustainable nance targets are not rooted in “robust methodology” and are not sufficiently aligned with one another.
Share Action’s analysis showed that 18 of the continent’s largest 20 banks, including HSBC, Barclays and BNP Paribas, are not on track to meet the $10-to-$1 ratio of green investment to fossil fuels investment the International Energy Agency says is needed by 2030.
It found that just Natwest and Nordea can realistically be expected to meet this milestone based on the sustainable nance targets they have set.
Despite sustainable finance being a critical driver to achieve emissions reductions, Share Action said 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 banks’ climate action efforts and be able to hold them to account.
Even some of the largest, most ambitious-sounding green finance targets are in reality small relative to a bank’s size, Share Action believes.
For example, the campaigner cites that HSBC’s goal of allocating up to $1trn (£770bn) towards sustainable investment by 2030 is just 1.8% of its total assets, while for Barclays’ it’s just 3.2% of its assets.
Different journeys
Five banks – BBVA, CaixaBank, Commerzbank, Deutsche Bank and HSBC – have set sustainable nance targets that cover their banking and asset management activities, but keep these activities separate in their decarbonisation targets, Share Action said.
Banks set decarbonisation targets over five years and sustainable nance targets, on average, over 10 years.
While almost all decarbonisation targets by banks are based on a clear methodology, just 13% of sustainable targets are backed by transparent, public methodology, Share Action claims.
All 20 banks have set at least one sectoral-specific decarbonisation target.
Vital role
Yet only nine banks have also set one for sustainable nance that illustrates how they are funding sectors that are crucial to a successful transition, such as renewable power and green technologies.
Banks rarely provide a breakdown for how much sustainable financing they provide to these sectors, Share Action said. Xavier Lerin, senior research manager at the campaigner, 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, he added: “Our analysis shows that in the majority of cases, the climate targets banks are using as a roadmap to transition are not t 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 nance the renewable power, green infrastructure and technologies needed to protect people and our economies.”
Responding to the research, a spokesperson for Barclays said: “Barclays is delivering against its target to facilitate $1trn [£776.7bn] of sustainable and transition nance by 2030 – a larger target than many peers, when viewed relative to total assets.”
portfolio institutional also contacted HSBC and BNP Paribas for comment on this issue, but at the time of printing, neither had responded.
Investor concern over how banks are falling short on green finance is a rising trend.
Investor coalitions signed statements addressing this were read to the boards of Société Générale and HSBC at their annual general meetings earlier this year.
As a next step, Share Action is writing to the chief executive of each bank with recommendations about how they can set effective climate targets that will help them reach their net-zero goal. In particular, it is urging banks to set sector-specific targets around sustainable nance that are grounded in science.
The banking standards team at Share Action has partnered with asset managers, asset owners and NGOs to call for Europe’s largest banks to phase out financing to polluting activities and instead increase the ow of capital into low-carbon alternatives.
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