A new report from Greenpeace and WWF, finds that UK banks and asset managers were responsible for financing 805 million tonnes of CO2 in 2019, which would make The City of London the 9th biggest emitter of CO2 in the world if it were a country – ranked higher than Germany.
The 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.
The analysis was carried out by South Pole using carbon accounting methodology PCAF to calculate the emissions associated with the lending and investment activities of the UK’s financial sector.
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.
Greenpeace says 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.
Greenpeace UK’s executive director, John Sauven, comments: “Finance is the UK’s dirty little secret. Banks and investors are responsible for more emissions than most nations and the UK government is giving them a free pass. How can we say we’re ‘leading the world on climate action’ while allowing financial institutions to plough billions into fossil fuel production every year? The claim is almost laughable."
He says the true extent of the carbon emissions funded by the UK’s finance sector is expected to be far greater, as the analysis used an indicative sample of the UK’s financial institutions - made up of fifteen banks and ten asset managers - and excludes certain financing activities like underwriting.
Despite this, UK financial institutions are not currently regulated in the same way as other high carbon sectors and, when it comes to cutting emissions, they are not legally required to align their financing activities with the UK’s or global climate commitments.
According to the Intergovernmental Panel on Climate Change (IPCC), in order to limit global temperature rises to 1.5°C, global emissions need to fall by 45% from 2010 levels by 2030.
A new poll of 550 UK finance professionals by iResearch Services shows that 52% believe that ‘greenwashing’ is rife within the industry, and 38% of those polled go on to say that they believe every business within financial services is operating unethically, by falsely claiming to be sustainable when they are not environmentally friendly practitioners.
WWF UK’s chief executive, Tanya Steele, dismisses voluntary pledges by banks as insufficent to tackle the true extent of clinmate change.
"Voluntary pledges aren’t getting the job done," she says. "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.”