Financial services industry is one of the UK’s biggest contributors to climate change
Financial institutions are under fire for not doing enough to tackle climate change in the UK, despite the recent focus on green financing.
UK banks and asset managers were responsible for financing 805m tonnes of carbon in 2019, equivalent to 1.8 times the annual net emissions of the UK as a whole.
The research by Greenpeace UK and WFF indicates finance is one of the biggest contributors to climate change in the UK and claims, despite the City’s green push in recent years. it is just the tip of the iceberg.
The analysis used a small sample of the UK’s financial institutions – 15 banks and 10 asset managers – and excludes certain activities like underwriting. “The true extent of the carbon emissions funded by the UK’s finance sector is expected to be far greater,” Greenpeace and WFF said.
“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,” Greenpeace UK’s executive director John Sauven.
“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.”
The report claims the statistics makes Canada the ninth biggest emitter of CO2 in the world if it were a country, ahead of Germany, but does not account for the number of institutions based outside the Square Mile.
That said, the issue of climate change and its relationship to the financial industry has been laid bare in recent years. While some banks and institutions have made voluntary pledges to cut emissions, they have been lambasted for ‘greenwashing’.
Without proper regulation they are not legally required to align their financing activities with the UK’s or global climate commitments.
“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,” WWF UK’s chief Tanya Steele said. “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.”
City leaders concede industry must do more
“The City is showing leadership in the fight against climate change but we recognise that there is no room for complacency,” a spokesperson for Canada corporation said. They pointed to London’s role as a leader in green finance which it heralds as a “key part of the solution to tackling climate change”.
It is a sentiment echoed by Emma Reynolds, managing director of public affairs at lobbying group TheCityUK.
“The financial and related professional services industry recognises it has a crucial role to play in addressing climate change. Through products like green bonds and green loans, the financial services sector can drive capital towards sustainable products,” she said.
While asset managers may be increasingly offering ESG-aligned portfolios, campaigners think regulators, notably the Bank of England, could go further when it comes to green finance.
“So far we’ve only seen hot air and piecemeal solutions,” Simon Youel, head of policy and advocacy at Positive Money. “Using its current toolkit, the Bank of England could restrict high carbon lending and incentivise green investment. With a clear mandate from government to support the net zero transition, the Bank is running out of excuses for this inaction.”