Europe’s top 20 banks are failing to provide clear and transparent information about their green finance activities, according to an investigation by campaign group ShareAction.
The report, released today, assesses how the 20 largest listed European banks – including those headquartered in the EU, the UK, Norway, and Switzerland – set green finance targets and report on green financing.
According to the results, only four out of the 20 banks surveyed – Barclays, BNP Paribas, ING, and Intesa Sanpaolo – publish even partial methodologies on how they calculate their green finance targets. The lack of transparent methodology and metrics makes it difficult to determine if green finance targets can lead to the intended goal and sits at odds with guidance from the TCFD and ISSB, both of which recommend the disclosure of methodologies and assumptions underpinning targets.
ShareAction’s research also found that many banks are including products in their green finance targets that do not necessarily lead to more funding going toward green activities. For example, BBVA’s goal of providing €300 billion in sustainable financing by 2025 includes structured deposits, which are not a form of lending.
Similarly, HSBC’s ambition to provide and facilitate $750 billion to $1 trillion of sustainable finance and investment by 2030 includes asset management, which is also not directly involved in lending or investment.
These report suggests that these broad targets, which encompass a wide range of products and services, are difficult to compare with the actual amount of capital that banks need to provide to support the transition to a net zero economy. They can also lead to misleading claims, as consumers may interpret “green finance” as simply “providing funds,” which is not always the case.
Additionally, several banks are including carbon-intensive energy generation activities, such as natural gas extraction projects (e.g. Crédit Agricole) and certain forms of biomass for power generation (e.g. Deutsche Bank), in their targets.
Xavier Lerin, senior research manager at ShareAction, said: “Banks widely promote their green credentials to their customers and shareholders.
“However there is a structural lack of transparency on what their green finance activities achieve.
“It remains unclear from what the banks themselves are reporting and in the targets they are setting whether they are actually providing the finance required to transition our economy and mitigate against the most damaging consequences of climate change.
“Banks must put their money where their mouth is and set clearly scientific targets that illustrate their working, or the public and investors will be left in the dark about how meaningful the contributions they are making to prevent the worst impacts of climate change and adapting our economy for a low carbon future.”
The report concludes that banks’ green finance targets and disclosures are ‘not fit for purpose’ and could lead to misleading claims, also known as greenwashing.
Whilst ShareAction points out that regulatory pressure is intensifying through the roll-out of taxonomies and reporting requirements, it is calling on policymakers and standard-setting bodies to establish clearer standards to ensure that banks are properly measuring the impact of their financing activities.
The group is also urging banks to be more transparent about their green finance targets and to ensure that their actions are aligned with their public statements.
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