Banks are crucial to tackling the climate crisis. They continue to play a part in financing high-carbon industries that undermine efforts to keep global temperature rises well above 2 degrees and also play a positive role in actively financing the low-carbon transition.

This report finds that the European banking sector is not yet doing enough to tackle the climate crisis. Despite the range of barriers to green finance identified by the banks, all appear to be actively looking to scale up green financing and develop low-carbon products and services. There is a real risk that banks’ continued financing of fossil fuels will overshadow any positive impacts they might achieve through financing low-carbon solutions.

The survey questionnaire broadly follows the Task Force on Climate-related Financial Disclosures (TCFD) while also going beyond and offering concrete suggestions for the for TCFD implementation.

There are a number of key findings and recommendations as a result of the survey. The general findings are below and the recommendations are discussed in the ‘Key Insights’:

1. Banks’ overall performance on climate change is still insufficient as the average score achieved in the survey is just 39.9%. No single bank demonstrates ‘best practice’ as the key barriers include a lack of data, challenges in integrating climate-related risks into traditional risk management processes and a lack of market norms for Paris-alignment.
2. Despite relatively strong governance processes and strategies on climate change, climate-related risks are not yet adequately managed.
3. It is possible for a bank (Lloyds Banking Group for example) to drastically improve its climate-related performance within a short timeframe.
4. All banks acknowledge the relevance of climate-related risks, but integration into traditional types of risk assessment is still incomplete.
5. The use of scenario analysis is now widespread, but the range of scenarios used and application across portfolios is still limited. Only one bank has carried out scenario analysis at group level, covering all assets.
6. Disclosures and target-setting in relation to banks’ exposures to carbon-related assets are still low. Only one surveyed bank (Lloyds Banking Group) has set a percentage target for the reduction of the carbon intensity of its lending portfolio.
7. Banks’ policies in relation to high-carbon sectors are currently still insufficient to ensure alignment with the goals of the Paris Agreement.
8. Banks are actively looking to scale up green financing, but they still face structural barriers and the variety of approaches impedes comparability.
9. The majority of banks are developing low-carbon products and services across banking divisions, but only 25% indicate that all their low-carbon products are independently reviewed for their sustainability credentials.
10. All banks surveyed are engaging with their regulators on the low-carbon transition but few banks engage with other policymakers or publish their positions on relevant issues.
11. Transparency levels on trade association memberships are high, but few banks have processes in place to ensure trade associations’ climate-related positions reflect their own.
12. Membership levels in climate-related industry initiatives is high and collaboration with a range of stakeholders is widespread.
13. All surveyed banks publish a strategy on climate change, but there is still great variation in terms of ambition and detail.
14. Governance structures at the surveyed banks are still insufficient to ensure an adequate response to the climate crisis.

1. Scenario analysis is critically important for banks to undertake across all portfolios and to disclose how the findings are integrated into strategy.
2. Banks need to update coal, oil and gas policies with phase-out targets in line with the latest science and should engage with clients on alignment with 1.5 degree scenarios, setting clear objectives and timelines.
3. It is necessary for banks to disclose exposure to low-carbon assets and underwriting activities while certifying and monitoring low-carbon assets to ensure their sustainability. In addition, all banks need to start measuring and disclosing the positive impact the bank has on enabling society to meet global climate goals.
4. Banks need to proactively engage with policymakers and regulators on both climate-related financial regulation and broader policies to reduce emissions. Subsequently, these positions need to be communicated to the public.
5. Banks should publish an ambitious, group-wide strategy on climate change detailing their approach to ensuring a just transition, disclosure on all information recommended by the TCFD, ensuring the board is a driving force with at least one member being an expert on climate-related issues, and ensuring the strategy leads to specific objectives and incentives for the organisation.
6. For investors, ShareAction recommends that they evaluate the climate-related performance of banks in their portfolio, engage in dialogue on climate-related strategies, participate in collaborations and vote in favour of ambitious climate-related resolutions.
7. As a retail customer, this report should provide the catalyst to find out about your bank's performance on climate-related issues and as a platform to ask your bank to improve their policies and practices.