coal miner pit

European banks continue fossil fuel funding despite climate pledges, report finds

Image credit: DT

European banks need to take more action on tackling climate change such as efforts to reduce emissions and safeguard nature, campaigners have warned.

A report looking into Europe’s top 25 banks from ShareAction identified some improvements in their climate and biodiversity strategies since the previous survey in 2020.

But they still have “a long way to go” to meet internationally agreed standards to deal with climate change, cut emissions and safeguard nature, the report found.

All 25 banks have said their businesses will be net-zero by 2050, but ShareAction said that a lack of transparency is leading to an underreporting of their support for high-carbon sectors.

While most banks now have at least one decarbonisation target in place, these often fail to capture the bulk of their financing to high-carbon sectors and do not always lead to absolute reductions of emissions, the report says.

Fossil fuel policies are often full of loopholes that make them unfit for alignment with efforts to keep temperature rises to 1.5°C above the pre-industrial era.

For example, despite over three-quarters of banks now having committed to phase out coal, the policies include gaps that allow them to continue financing coal clients. In oil and gas, the banks' progress has been even slower.

While the number of banks announcing asset financing restrictions on new oil and gas fields has doubled in eight months, they are reluctant to introduce any restrictions for new oil and gas at the corporate level. This is despite warnings from the International Energy Agency that there is no room for coal expansion and new oil and gas fields if the world is to reach net zero by 2050.

The vast majority of banks also lack adequate biodiversity strategies and are failing to include biodiversity in their risk analysis when assessing potential clients and projects.

Peter Uhlenbruch, director of financial sector standards at ShareAction, said: “Despite important steps forward, the leadership of Europe’s top banks are not moving fast enough to drive the change needed to protect people and the planet.

“ShareAction has written to the CEOs of each of the banks with a set of tailored recommendations about how they can close loopholes in their climate and biodiversity strategies.

“Without robust decarbonisation targets underpinned by credible fossil fuel policies, these banks cannot fulfil their commitments to align their businesses with net-zero and prevent the worst impacts of the climate crisis.”

“The banks are paying far too little attention to the threat of biodiversity loss. Bank executives and their boards need to step up and take responsibility for the impact their activities are having on the ecosystems of the world’s oceans, forests and wildlife.”

“Banks have made promises to investors and the public – it’s time they deliver on those commitments.”

ShareAction’s report found that French bank BNP Paribas was ranked slightly better than others in its efforts, but even they still have a long way to go, it found. The worst performer was DZ Bank from Germany. The best performing UK banks in the report were Barclays and Lloyds Banking Group, followed by HSBC and NatWest.

“Most banks’ targets are intensity-based. Banks must urgently complement these with commitments to halve emissions across their financing activities, making sure that absolute emission cuts are achieved in the real economy,” the report said.

ShareAction called on banks to set targets that will guarantee a reduction in absolute emissions for the real economy.

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