Banks ditch sustainability as economic headwinds slows progress
SUSTAINABILITY is falling down the list of priorities for many UK banks, after a new study found the number of banks stating sustainability was a key part of their business strategy had plummeted by 40 per cent in a year.
Only 60 per cent of banking leaders in the UK say sustainability is an important part of their strategy, down from 100 per cent just a year ago, according to IT firm Mobiquity’s Benchmark for Sustainable Banking Report.
The report said sustainability considerations are dropping down the agenda as falling consumer confidence and rising interest rates sharpen the attention on banks’ bottom lines.
The report, based on a survey of 150 UK banking executives conducted by Censuswide, suggests that banks are less concerned about offsetting unsustainable practices than last year. 29 per cent are currently offsetting through carbon credit schemes, down from 50 per cent last year.
The number of banks with an executive at board level overseeing sustainability strategy has decreased from 83 per cent last year to 54 per cent.
Peter-Jan Van De Venn at Hexaware Mobiquity said that although banks had made progress in recent years on sustainability, “much of that work is now being undone.”
“The macroeconomic headwinds have forced banks to batten down the hatches and focus on activity that will deliver clear, immediate returns. From board level to front-line teams, banks have been concentrating on keeping their bottom lines healthy, forcing sustainability to take a back seat.”
The report comes off the back of the worst year in a decade for ESG funds as they underperformed non-ESG funds, which included oil and gas companies boosted by surging energy prices.
This meant that in 2022 investors pulled more money from funds labelled sustainable than they added for the first time in a decade.
Although sustainability is seemingly falling down the agenda for banks, regulators are increasingly demanding higher standards.
The government is attempting to turn the UK into the world’s first Net Zero financial centre with watchdogs consulting on a range of issues such as ESG labelling and transition plans, which map out how a company intends to transition to Net Zero.
Despite the recent dropoff, financial firms are ahead of many other sectors in their disclosure of transition plans.
A UK Finance spokesperson said: “The banking and finance sector takes the issues of environmental sustainability and the transition to Net Zero very seriously.”
“The sector is playing a key role in supporting decarbonisation, including through decarbonising its own portfolios, and our members are committed to helping finance the transition across the economy.”