Banking Industry Fails to Meet Decarbonization Goals

Global banking institutions have made minimal efforts to help reduce carbon emissions, with even those that have set targets falling short. According to two recent reports, the Net Zero Banking Alliance, which comprises major banks such as Barclays and HSBC, released a report highlighting that only 50% of its members have set intermediate decarbonization targets. These targets are deemed "meaningful and science-based" as they prioritize the most carbon-intensive businesses and significant financial exposures. However, the report also warns that a third of the Alliance's banks risk compromising their commitment to net zero due to inadequate targets.

Key Takeaways:

• The Net Zero Banking Alliance has 60 members (50% of the global banking industry), with 43 banks publishing targets by October's end, with nine out of ten having done so.
• Of the 60% of banks outside the Alliance, many have made little effort to decarbonize, citing the Alliance's progress as a trailblazer for other banks to follow.
• ShareAction's analysis found that 16 banks of the 43 biggest in the Alliance set overarching targets for emissions reductions by 2030, but many banks exclude capital markets activities, failing to capture their full climate impact.
• Banks instead used 'emissions intensity' data rather than targeting absolute emissions reductions, which ShareAction deemed "ineffective" in capturing climate impact.
• Twenty-five banks with oil and gas targets failed to include capital markets activities in their decarbonization targets, despite these forming the bulk of financing provided to the oil and gas industry.
• Important advances have been made in target setting for the transport sector, with 15 banks committing to automotives, five banks in aviation, and two banks in shipping.
• Only one bank published a target for agriculture, and none for the chemicals sector, both posing "significant climate risks" for investors.

Statistics:

• Forty-three banks in the Alliance published targets by October, with nine out of ten having done so.
• Sixteen banks set overarching targets for emissions reductions by 2030.
• Twenty-five banks with oil and gas targets failed to include capital markets activities in their decarbonization targets.
• 77% of Credit Suisse and 94% of UBS financing for oil and gas are in capital markets activities.

Sources:

• The Net Zero Banking Alliance report on Wednesday
• ShareAction's analysis published data cited in the report
• United Nations Environment - Finance Initiative (UNEP FI)
• ShareAction's statement on behalf of Xavier Lerin, senior research manager at ShareAction