A recent report from Greenpeace and WWF reveals that UK banks and asset managers contributed to financing a staggering 805 million tonnes of CO2 emissions in 2019. This figure positions the City of London as the ninth-largest CO2 emitter globally, surpassing Germany in the rankings.
The findings underscore the significant role of finance in exacerbating climate change and bolster calls for the introduction of regulations across the sector to align with the targets set by the Paris Agreement. The research, conducted by South Pole using the Partnership for Carbon Accounting Financials (PCAF) methodology, assessed the carbon emissions linked to the lending and investment activities of the UK’s financial institutions.
The analysis indicates that emissions financed by UK banks and asset managers were 1.8 times the total annual net emissions of the UK. Greenpeace asserts that the financial sector should be classified as a “high carbon sector,” akin to industries such as oil, gas, coal mining, aviation, and transportation.
John Sauven, executive director of Greenpeace UK, stated, “Finance is the UK’s dirty little secret. Banks and investors contribute to more emissions than many nations, yet the UK government is allowing them to operate with minimal oversight. It is absurd to claim we are ‘leading the world on climate action’ while enabling financial institutions to invest billions in fossil fuel ventures each year.”
Sauven also noted that the actual carbon emissions funded by the UK’s financial sector could be even higher, as the analysis was based on a limited sample of 15 banks and 10 asset managers, excluding certain financing activities such as underwriting.
Currently, UK financial institutions are not regulated in the same manner as other high carbon sectors. They are not legally obligated to ensure that their financing practices align with either national or global climate commitments.
The Intergovernmental Panel on Climate Change (IPCC) emphasizes that, to limit global temperature increases to 1.5°C, emissions need to decrease by 45% compared to 2010 levels by 2030.
A recent survey of 550 UK finance professionals conducted by iResearch Services revealed that 52% believe ‘greenwashing’ is prevalent within the industry. Additionally, 38% expressed concerns that all businesses within financial services are operating unethically by falsely portraying themselves as sustainable.
Tanya Steele, chief executive of WWF UK, criticized voluntary pledges made by banks as inadequate for addressing the seriousness of climate change. “Voluntary commitments are failing,” she stated. “The UK Government must demonstrate the global leadership anticipated from the COP26 Presidency by mandating all financial institutions to develop net-zero transition plans encompassing their global investments.”