Only two of Europe’s top 20 banks scored above 50 out of 100

At a glance

  • Research by non-profit Reclaim Finance finds the climate transition plans of Europe’s 20 biggest banks are “not fit for purpose”

  • France’s La Banque Postale, which had the highest overall score of 55.6, followed by ING with a score of 53, were the only two banks that scored above 50 in the study

  • Reclaim Finance is urging European leaders to reject the European Commission’s omnibus proposal, saying the drive to reduce bureaucracy is “jeopardising” EU transition planning rules

The climate transition plans of Europe’s 20 biggest banks are “not fit for purpose”, with only two banks scoring above 50 out of 100 for their climate strategies, according to research by non-profit Reclaim Finance.

The average score for all banks across five areas analysed — decarbonisation targets, decarbonisation strategy, engagement strategy, reporting and governance, “just” transition, and biodiversity — was 41 out of 100, with almost half of banks scoring between 35 and 45 points.

More is needed

The non-profit said the lower totals overall meant even the leading banks cannot claim to be transitioning to net zero and need to “go much further” to deliver on their climate commitments. It also called on EU regulators to “toughen rules” to ensure banks take the transition seriously, and said the European Commission’s drive to simplify sustainability reporting is “jeopardising” EU transition planning rules.

France’s La Banque Postale, which had the highest overall score of 55.6, followed by ING with a score of 53, were the only two banks that scored above 50 in Reclaim Finance’s study.

La Banque Postale said in a statement that it had decided to “fully embrace” the requirements of the EU’s Corporate Sustainability Reporting Directive by “voluntarily” publishing a climate transition plan at the end of March. The bank has also pledged to exit fossil fuels by 2030.

BNP Paribas and Lloyds Banking Group shared third spot with a total score of 49.7 each. Barclays scored fifth overall with a score of 46.5. Five French banks — La Banque Postale, BNP Paribas, Crédit Agricole, Société Générale and Crédit Mutuel — finished in the top 10 with the highest overall scores across the five areas analysed by Reclaim Finance’s study.

Germany’s DZ Bank, Groupe BPCE of France and Rabobank of the Netherlands scored among the lowest (less than 31 out of 100), which Reclaim Finance attributed to their “flawed decarbonisation targets and lack of a decarbonisation strategy”.

DZ Bank rejected the study’s findings, saying it is committed to 1.5C and places great emphasis on adhering to “strict standards” in its environmental, social and governance work.

The bank said in a statement that it informed Reclaim Finance that its CSRD report, which includes decarbonisation targets for fossil fuels and chemicals, would be published by the end of March, but that the report was not considered by the non-profit.

Santander and HSBC, with overall scores of 32.9 and 37.8, respectively, were only marginally higher, losing points because of their “ongoing support for fossil fuels, and flawed decarbonisation targets and strategy”, says Reclaim Finance.

Santander said in an emailed statement that it has set emissions reduction targets for 2030 across a range of material-emitting sectors, and that its lending decisions are subject to a “strict policy framework”. However, “an orderly and just transition” to net zero depends on economic growth, and on governments setting policy frameworks that support and incentivise the market, the bank added

HSBC had one of the highest scores (85 out of 100) for reporting and governance. However, the non-profit said “voluminous reporting does not correlate with a meaningful decarbonisation strategy or targets”.

The UK bank is one of only a handful that has published a report labelled “transition plan”. However, Reclaim Finance says such reports may not yet include all relevant information.

In February, HSBC scrapped its target of achieving net zero carbon emissions across its business by 2030, saying it only expects a 40 per cent reduction in emissions from its operations, business travel and supply chains by the end of this decade.

On average, banks scored highest for climate reporting and governance, and setting decarbonisation targets, which they are required to do under voluntary industry initiatives such as the Net-Zero Banking Alliance and the Taskforce on Climate-related Financial Disclosures. However, they scored significantly lower on more “concrete” transition actions such as their decarbonisation and engagement strategy.

Not fit for purpose

“The finance sector has a critical role to play in delivering Europe’s net zero ambitions, but European banks’ transition planning is not fit for purpose,” Christophe Etienne, one of the study’s authors, said in a statement. “Our analysis shows banks won’t adopt credible transition plans unless they are required to do so.”

Etienne said “tougher rules” are needed to ensure banks take the transition seriously and accused EU leaders of contemplating scrapping obligations for transition planning, as part of the commission’s “omnibus” proposal.

Reclaim Finance urged European leaders to reject the proposal, saying the drive to “simplify” legislation is “jeopardising” EU transition planning rules.

All banks mentioned in this article were contacted for comment. In a statement, Groupe BPCE said Reclaim Finance’s analysis and figures do not reflect the reality of its commitments and public data, and noted “omissions and oversights”.

“Our actions are concrete and transparent regarding the environment, in terms of climate and biodiversity, as well as our societal commitment,” said Groupe BPCE, referring to the setting of new “ambitious and specific” climate objectives for clients in all territories where it operates.

The French bank said its exposure to the coal sector is minimal, representing less than 0.2 per cent of total global corporate lending. It has a 2030 target of reducing greenhouse gas emissions in the oil and gas sector by 70 per cent, in absolute terms.

Crédit Agricole and Barclays declined to comment. Crédit Agricole says it regularly and transparently publishes updates on its climate transition plan, which is monitored at the highest level of the company’s governance.

Rabobank, as a co-operative bank, said it is committed to supporting its customers and promoting renewable energy.

This article first appeared in The Banker.