Finance sector declared as one of UK's biggest contributors to climate change
UK banks and asset managers financed carbon emissions that were 1.8 times the annual net emissions of the UK as a whole

Pedro Gonçalves and Hope William-Smith
25 May 2021

UK banks and asset managers were responsible for financing 805 million tonnes of CO2 in 2019, which would make the City of London the ninth biggest emitter in the world if it were a country, according to a report by Greenpeace UK and the World Wildlife Fund (WWF).

The new research points towards finance as one of the UK's largest contributors to climate change and supports calls for regulation to be introduced across the sector to bring it into line with Paris Agreement targets.

UK banks and asset managers financed carbon emissions that were 1.8 times the annual net emissions of the UK as a whole, the report reveals, placing UK finance at the same level as oil and gas extraction, coal mining, aviation and transport, high-carbon sector.

Greenpeace UK executive director John Sauven, 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.

"How can we say we are 'leading the world on climate action' while allowing financial institutions to plough billions into fossil fuel production every year? The claim is almost laughable.

"As the host of this year's pivotal global climate summit, the government can no longer turn a blind eye. Rather than relying on self-regulation, we need legislation that forces all banks and asset managers to align all financing activities with the goals of the Paris Agreement. That would be genuine climate leadership."

The analysis, carried out by climate solutions and project developer South Pole, used 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.

However, the report might just have revealed the tip of the iceberg as the analysis used an indicative sample of the UK's financial institutions - made up of 15 banks and ten asset managers - which excludes certain financing activities such as 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.

Instead, some banks and other financial institutions are making voluntary pledges to reduce their carbon emissions, which have been dismissed by as greenwashing and alone will not deliver the emissions reductions required to successfully tackle climate change.

WWF UK chief executive Tanya Steele said: "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 is clear voluntary pledges are not 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."

Greenpeace UK and WWF are now calling for legislation that requires all UK-regulated financial institutions to adopt and implement a transition plan that is in keeping with the goal of limiting global temperature rises to 1.5°C.
Pension pressure

The findings from Greenpeace and WWF come after The Pensions Regulator (TPR) warned the defined contribution market to pay more attention to climate change back in February. TPR then followed up with the release of its climate strategy, calling specifcially on trustees to "act now" to protect pension savers from climate risk.