Banking on a Low-Carbon Future II - A ranking of the 20 largest European banks’ responses to climate change

The climate crisis is the defining issue of our time. The threat is unprecedented in scale and will have far reaching impacts across the globe. The action we take in the next decade will be critical; and the banking sector has a crucial role to play.

On the one hand, banks continue to finance high-carbon activities, undermining global efforts to keep global warming to well-below 2 degree Celsius. They need to stop financing these industries, to avoid the disastrous impacts of climate change for the planet, and their own portfolios. Other the other hand, banks will have a critical role in actively financing the low-carbon transition. Without the banking sector, this transition will be impossible.

It is in this context that ShareAction have ranked 20 of the largest European banks, based on their response to the climate crisis.

The European banking sector is not yet doing enough to tackle the climate crisis. The average score achieved in this survey is just 39.9 per cent, which qualifies for the ‘business as usual’ rating band. Not a single bank currently represents best practice in managing climate-related risks and opportunities across all assessed areas. However, encouragingly, one bank (Lloyds Banking Group) has shown that it is possible to improve climate-related performance very quickly.

General findings include:

• Banks’ overall performance on climate change is still insufficient
• Despite relatively strong governance processes and strategies on climate change, climate-related risks are not yet adequately managed.
• It is possible for a bank to drastically improve its climate-related performance within a short timeframe.
• All banks acknowledge the relevance of climate-related risks, but integration into traditional types of risk assessment is still incomplete.
• The use of scenario analysis is now widespread, but the range of scenarios used and application across portfolios is still limited.
• Disclosures and target-setting in relation to banks’ exposures to carbon-related assets are still low.
• Banks’ policies in relation to high-carbon sectors are currently still insufficient to ensure alignment with the goals of the Paris Agreement.
• Banks are actively looking to scale up green financing, but they still face structural barriers and the variety of approaches impedes comparability.
• The majority of banks are developing low-carbon products and services across banking divisions, but independent verification is still limited.
• All banks surveyed are engaging with their regulators on the low-carbon transition, but few banks engage with other policymakers or publish their positions on relevant issues.
• Transparency levels on trade association memberships are high, but few banks have processes in place to ensure trade associations’ climate-related positions reflect their own.
• Membership levels in climate-related industry initiatives is high and collaboration with a range of stakeholders is widespread.
• All surveyed banks have a strategy on climate change, but there is still great variation in terms of ambition and detail.
• Governance structures at the surveyed banks are still insufficient to ensure an adequate response to the climate crisis.