A report published today (25 May 2021) by Greenpeace UK and WWF reveals UK banks and asset managers were responsible for financing 805 million tonnes of CO2 in 2019.
To put that into context, if The City of London were a country it would be the ninth biggest emitter of CO2 in the world – ranking higher than Germany.
The new research 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 into line with Paris Agreement targets.
A ‘high carbon sector’
The analysis, carried out by leading climate solutions and project developer South Pole, used market-leading carbon accounting methodology to calculate, for the first time, the carbon emissions associated with the lending and investment activities of the UK’s financial sector, based on an indicative sample.
It found that UK banks and asset managers financed carbon emissions that were 1.8 times the annual net emissions of the UK as a whole.
The findings demonstrate that UK finance should be considered a ‘high carbon sector’, not dissimilar to oil and gas extraction, coal mining, aviation and transport.
‘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.
‘The UK financial sector could be the first in the world to be aligned with the Paris Agreement targets – and reap the rewards as global business shifts towards clean, green investments. But it’s clear voluntary pledges aren’t getting the job done. The UK government must show the global leadership expected of the COP26 Presidency and commit to mandating all financial institutions to have net zero transition plans that cover their investments in every corner of the globe.’
WWF UK’s chief executive
Tip of the iceberg
While the findings clearly demonstrate the scale of impact from financial institutions in driving climate change, the report also highlights that this is just the tip of the iceberg.
The analysis used an indicative sample of the UK’s financial institutions – made up of 15 banks and 10 asset managers – and excludes certain financing activities like underwriting.
As a result, the true extent of the carbon emissions funded by the UK’s finance sector is expected to be far greater.
Despite this, UK financial institutions are not currently regulated in the same way as other high carbon sectors. When it comes to cutting emissions, they 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, many of which have been exposed as greenwash. Alone they will not deliver the emissions reductions required to successfully tackle climate change.