Overview

The State of the Banking Transition 2026 is a benchmark series report produced by the TPI Global Climate Transition Centre at the London School of Economics and Political Science (LSE). This series provides a comprehensive review of the progress made by 36 of the world’s largest global banks regarding the low-carbon transition. It evaluates banks’ disclosures and transition plans using two distinct assessment tools: the Net Zero Banking Assessment Framework (NZBAF) and Carbon Performance for Banks. The report covers banks headquartered across multiple jurisdictions, including Europe, North America, China, and Japan, offering a global perspective on the banking sector’s alignment with international climate goals.

Purpose

This benchmark series exists to offer an independent and authoritative source of data for investors and other stakeholders to assess the quality of banks’ governance and management of carbon emissions. It is designed to inform decision-making by evaluating whether banks’ current and planned future emissions align with the Paris Agreement and national climate pledges. By providing detailed assessments of transition plans, particularly in high-emitting sectors, the report helps stakeholders understand how banks are managing climate-related risks and opportunities. It also serves to highlight where climate commitments and policies are being scaled back or weakened amid shifting regulatory expectations.

Methodology

The assessment is based solely on publicly available bank disclosures published before July 2024. The NZBAF component employs a structured set of 72 sub-indicators across nine key areas, such as net zero commitments, sectoral targets, and climate governance, to evaluate the robustness of transition plans. The Carbon Performance for Banks tool assesses which sectors banks have set decarbonisation targets for and measures the alignment of these pathways against benchmarks like 1.5°C and Below 2°C. The report distinguishes between in-model adjustments and management overlays in financial statements. For comparisons across years, a sample of 26 banks and 57 sub-indicators is used to maintain consistency.

Use for finance professionals

Finance professionals can utilise this report to scrutinise the credibility of banks’ net zero claims and identify potential risks of policy retreat. The granular data on sectoral target coverage—particularly in energy, transport, and industrial sectors—enables asset managers to conduct more precise portfolio alignment analysis. Furthermore, the analysis of climate-related risks in financial statements allows risk officers and auditors to compare accounting assumptions and judgements across the sector. This information is critical for engagement activities, helping investors challenge banks on their provisioning for climate risks and their integration of climate scenarios into expected credit loss models. The report includes a case study on Lloyds Banking Group, detailing its use of NGFS scenarios to assess transition and physical risks in its mortgage and commercial portfolios.