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Campaign group ShareAction has called on Europe’s top 20 banks to be “clearer, cleaner, and greener” when communicating their response to the climate crisis, after an investigation suggested their green finance targets and reporting risk misleading both customers and investors.
According to new research published today, though each of the banks investigated have set a net zero target or report on their green finance activity in some capacity, only Barclays, BNP Paribas, ING, and Intesa Sanpaolo publish partial information on how they calculated some of their related climate targets.
This, ShareAction’s banks team claimed, has created a widespread lack of transparency around green finance activity and confusion over whether the banks surveyed are committed to financing a green energy future. As such, it leaves all 20 banks open to accusations of greenwashing given their promotion of their green credentials is not backed up by clear information on how green financing targets have been developed.
For example, the report highlights how most of the targets set by leading banks focus on a specified sum of money without clear reference to how green finance is expanding relative to a banks’ size, growth, geographic footprint, the weighting of the different sectors it invests in, or its historic financing of the activities and infrastructure driving climate change.
ShareAction said that failure to provide such context made it impossible to tell whether banks’ targets represent a “fair share” of their contribution to the net zero transition.
Xavier Lerin, senior research manager at ShareAction, said the research highlighted a “structural lack of transparency” on what the banks’ green finance activities achieve, and called on policymakers and standard-setting bodies to establish clearer standards to ensure banks are properly measuring the impact of their financing.
“It remains unclear from what the banks themselves are reporting and in the targets they are setting whether they are actually providing the finance required to transition our economy and mitigate against the most damaging consequences of climate change,” he said.
“Banks must put their money where their mouth is and set clearly scientific targets that illustrate their working, or the public and investors will be left in the dark about how meaningful the contributions they are making to preventing the worst impacts of climate change and adapting our economy for a low carbon future.”
According to ShareAction, leading banks were also found to frequently include products in their green finance targets which do not necessarily lead to more funding going toward green activities such as sustainable technology development or renewable power generation.
Moreover, the report claimed many banks included carbon-intensive energy generation activities in their green financing targets, such as natural gas extraction projects and certain forms of biomass for power generation.
Concerningly, the investigation suggested banks apply double standards to reducing emissions and increasing green financing, and that almost no banks account for capital markets facilitation – where banks help companies to raise funds through bond issuance and other mechanisms – in decarbonisation targets. Almost all banks include capital markets facilitation in their green finance targets, however.
While Barclays was found to be the only bank that includes capital markets in its emissions reduction targets, ShareAction revealed it only counts 33 per cent of its share in a deal, whereas it counts 100 per cent when it goes toward its green finance target.
Moreover, the investigation uncovered how just 35 per cent of banks investigated measured the real impact of financing, such as the level of renewable energy capacity installed through financing activity, while several banks failed to make a distinction between green financing was for new assets and for existing clean energy projects.
In one example, HSBC reported 77 per cent of its 2022 green bond allocation was to already existing projects.
A spokesperson for HSBC stressed that supporting the transition to a net zero emission economy and engaging with clients to help them diversify and decarbonise their assets was a key priority for the bank.
“In 2020 we set out an ambition to provide and facilitate between $750bn and $1tn of sustainable finance and investment by 2030,” they said. “We seek to apply market standards in providing sustainable finance and for identifying and reporting sustainable financing and investments towards our ambition in our annual disclosures.”
BusinessGreen contacted a number of banks named in ShareAction’s research but had not received responses at the time of writing.
The report comes just days after professional services firm Alvarez & Marsal’s second Green PACE rankings revealed that UK banks are outperforming European and US peers in supporting the transition to net zero – with NatWest taking top spot.
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