(Tuesday 5th November) Fresh analysis published today by responsible investment NGO ShareAction has exposed low-ambition and incoherent climate targets at Europe’s 20 largest banks. This means banks are unlikely to succeed in shifting enough financing away from fossil fuels and toward renewable power, green infrastructure and technologies at the speed and scale needed to prevent a dangerously heated world.

The research, which analysed both targets for reducing emissions from financing activities and targets for increasing sustainable finance, found that overall banks’ decarbonisation targets are too narrow, their sustainable finance targets are not rooted in robust methodology, and they are not sufficiently aligned with one another.

ShareAction’s analysis showed that 18 out of 20 banks, including HSBC, Barclays and BNP Paribas, are not on track to meet the $10 to $1 ratio of green investment to fossil fuels investment that the International Energy Agency says is needed by 2030. It found that just NatWest and Nordea can realistically be expected to meet this milestone based on the sustainable finance targets they have set.

Despite sustainable finance being a critical driver to achieve emissions reductions, banks are inconsistent in their approach to target-setting, making it difficult for the public, regulators and investors to judge the real impact of banks’ climate action efforts and be able to hold them to account.

Xavier Lerin, Senior Research Manager at ShareAction, said: “Europe’s biggest banks have a vital role to play in financing the transition to a low-carbon economy, such as scaling up renewable energy, making real estate energy efficient and supporting important industries to decarbonise.

“However, our analysis shows that in the majority of cases, the climate targets banks are using as a roadmap to transition are not fit for purpose, which is putting at risk our ability to protect society from the worst impacts of climate change.

“We urgently need banks to set more ambitious and coherent targets that transparently map out how they will live up to their commitment to finance the renewable power, green infrastructure and technologies needed to protect people and our economies.”

Other findings from the analysis:

• Even some of the largest, most ambitious-sounding green finance targets are in reality very small relative to a bank’s size - for example, HSBC’s goal of up to $1 trillion towards sustainable investment by 2030 accounts for just 1.8 per cent of its total assets, whilst Barclays’ is just 3.2 per cent of its total assets.

• Five banks (BBVA, CaixaBank Group, Commerzbank, Deutsche Bank and HSBC) have set sustainable finance targets that cover both banking and asset management activities, but keep these activities separate in their decarbonisation targets. We also find that banks set decarbonisation targets over 10 years and sustainable finance targets over five years, on average.

• Whilst almost all decarbonisation targets by banks are based on a clear methodology, just 13 per cent of sustainable targets are backed by transparent, public methodology.

• All 20 banks have set at least one sectoral-specific decarbonisation target. Yet, only nine banks have also set one for sustainable finance that clearly illustrates how they are funding sectors that are crucial to a successful transition, such as renewable power and green technologies. Banks rarely even provide a breakdown for how much sustainable financing they provide to these sectors

ShareAction is writing to the CEOs of each bank with recommendations about how they can set effective climate targets that will help them to reach their net zero goal and live up to their commitments to protect people and the planet. In particular, it is urging banks to set sector-specific targets around sustainable finance that are grounded in science.

Notes to editors

Investor concern over banks’ approaches to green finance falling short is rising, with investor coalitions signing statements addressing this issue that were read to the boards of both Société Générale and HSBC at their annual general meetings earlier this year.

The Banking Standards team at ShareAction partners with asset managers, asset owners, NGOs, retail investors and representatives of affected communities to demand Europe’s largest banks phase out financing to polluting activities and increase the flow of capital into low-carbon alternatives.

ShareAction is an NGO working to shape a world where the financial system serves our planet and its people. We mobilise global investors to use their influence to drive up labour standards, tackle climate change, protect the natural world, and improve people’s health. We push policymakers to ensure the financial system is working in the best interests of society. We work with people to create a movement for change. Visit shareaction.org or follow us @ShareAction to find out more.