A new report has found that the UK finance sector funds activities responsible for almost double Britain’s net total emissions, and more than most other countries.
The report from Greenpeace and WWF found that just 25 of the UK’s largest banks and asset managers financed the equivalent of 805 million tonnes of CO2 emissions in 2019. If these companies were a country, it would rank ninth in the world in terms of contribution to the emissions causing the global climate crisis, larger than either Germany or Canada.
The stark finding comes as the Bank of England (BoE) prepares a climate stress test for many of the same financial institutions examined in the report. The bank’s Climate Biennial Exploratory Scenario exercise will launch next month with the publication of climate-related scenarios, and major financial institutions have been invited to respond.
Although the stress testing is intended to assess climate risk and not to directly reduce greenhouse gas emissions, the results of the Greenpeace/WWF study indicate a substantial exposure to fossil fuels in the UK financial industry. There is therefore likely to be a corresponding level of transition risk from the movement to sustainable alternatives.
“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 chief executive Tanya Steele said in a press release accompanying the report. “It’s clear voluntary pledges aren’t 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 executive director John Sauven described finance as 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,” he said, calling for “legislation that forces all banks and asset managers to align all financing activities with the goals of the Paris Agreement.”
The revelations of the UK financial industry’s oversized carbon footprint follow last week’s launch of a consultation process, also from the BoE, on greening its QE corporate asset purchase programme. Research shows a significant bias towards high-carbon activities in the bank’s corporate purchases. However, the consultation’s primary goal is not simply to minimise the current carbon footprint of the Corporate Bond Purchase Scheme, but to improve companies’ incentives for making the necessary changes to hit net-zero emissions.
The results of this report suggests they have a long way to go.
This page was last updated June 1, 2021
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