City of London financial district street scene

British finance sector funds double the carbon emissions produced by UK

Image credit: Irstone/Dreamstime

UK banks and asset managers were responsible for financing 805 million tonnes of CO2 in 2019, or around twice the UK’s annual carbon emissions, a report has found.

Commissioned by Greenpeace UK and WWF, the findings suggest that the City of London would be the ninth biggest emitter of CO2 in the world if it were a country – ranked higher than Germany.

The report points towards finance as one of the UK’s biggest contributors to climate change and supports calls for regulation to be introduced across the sector to bring it in line with Paris Agreement targets.

It goes so far as to suggest that UK finance should be considered a ‘high-carbon sector’, not dissimilar to oil and gas extraction, coal mining, aviation and transport. 

The analysis used an indicative sample of the UK’s financial institutions, made up of fifteen banks and ten asset managers, but excludes certain financing activities like underwriting which, if included, would see the UK’s finance sector have an even greater carbon impact.

UK financial institutions are not currently regulated in the same way as other high-carbon sectors and are not legally required to align their financing activities with the UK’s or global climate commitments.

Instead, some banks and other financial institutions are making voluntary pledges to reduce their carbon emissions. However, the report accused them of “greenwashing” and said the emissions reductions required to successfully tackle climate change would not be delivered this way.

Greenpeace UK’s executive director, John Sauven, said: “Finance is the UK’s dirty little secret. Banks and investors are responsible for more emissions than most nations and the UK government is giving them a free pass.

“How can we say we’re ‘leading the world on climate action’ while allowing financial institutions to plough billions into fossil fuel production every year? The claim is almost laughable.

“As the host of this year’s pivotal global climate summit, the government can no longer turn a blind eye. Rather than relying on self-regulation we need legislation that forces all banks and asset managers to align all financing activities with the goals of the Paris Agreement. That would be genuine climate leadership.”

WWF UK’s chief executive, Tanya Steele, said: “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. Despite seeing ambitious commitments to tackle the climate emergency, our finance sector is still driving global investment towards the old, destructive ways of doing business that are destroying our one shared home.”

A spokesperson for the bank lobby group UK Finance said lenders took their “responsibility to wider society very seriously” and were taking a “leading role in the shift to net zero finance”.

The United Nations wants wealthier nations to spend $100bn per year to help developing countries tackle and adapt to climate change.

A recent report found that while spending has been ramping in this area, it is still below this target.

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