Banks in the UK invest an estimated £119 billion into fossil fuel projects, going against their declared commitment to a greener future.
UK Banks' Climate Commitments and Financing Activities Under Scrutiny
The climate transition strategies of UK banks have come under increasing pressure from investors, yet significant changes have yet to be seen. Despite setting net zero by 2050 targets and restricting direct financing to fossil fuel expansion, these banks continue to allow for capital flow into companies expanding oil and gas exploration, according to a recent report.
Financing Patterns and Green Commitments
From 2020 to 2024, all four major UK banks — Barclays, HSBC, Lloyds, and NatWest — provided more funding to fossil fuel companies than to green companies, despite their net zero by 2050 pledges. This discrepancy between public commitments and actual capital allocation has raised concerns about the banks' dedication to a sustainable future.
HSBC, for instance, maintains its 2050 net zero commitment but has admitted challenges in achieving these goals due to economic realities. HSBC recently exited the Net Zero Banking Alliance (NZBA), signaling potential weakening of collective efforts while continuing to engage with the Glasgow Financial Alliance for Net Zero (GFANZ).
In contrast, NatWest has announced a doubling of its climate and transition finance commitment, aiming to deliver $267 billion (£200 billion) to support the transition to net zero, showing a relatively stronger emphasis on shift towards green financing activities compared to its peers.
Engagement in UK's Sustainable Finance Framework
The UK government is advancing consultations on mandatory disclosure of climate transition plans for UK-regulated financial institutions, including banks like Barclays, HSBC, Lloyds, and NatWest. These banks play a crucial role in shaping and responding to the UK’s evolving sustainable finance regulations.
Despite government efforts to establish the UK as a "green finance capital," there are tensions balancing legal accountability with banks’ desire for flexibility to finance economic and industrial needs during the energy transition. The banks' lobbying dynamics are complex and, as of now, there is no direct evidence detailing how they have lobbied the government on the sustainable finance framework.
A Closer Look at the Banks' Actions
The report assessed the UK's four largest banks and found that all four continue to finance high-emitting industries such as oil and gas at rates incompatible with the International Energy Agency's Net Zero Emissions by 2050 scenario. The five oil majors — ExxonMobil, Shell, BP, Aramco, and TotalEnergies — collectively received £24.1bn in financing deal flows from UK banks, accounting for 20.3% of total identified fossil fuel financing.
Barclays, HSBC, and Lloyds have financed more fossil fuel companies than green companies every year for the past three years. In contrast, total financing for green companies stood at £59.7bn between 2020 and 2024, which represents just 3.5% of total financing assessed.
Investor Concerns and Future Steps
The report also identified £119bn in financing from UK banks to the fossil fuel sector between 2020 and 2024, spread across 1,183 individual deals with 354 companies. Investors have expressed their views on climate issues at various bank AGMs, including the Church of England Pensions Board's call for a full exit from fossil fuel financing at Lloyds' AGM in Edinburgh.
Jeanne Martin, head of the banking program at ShareAction, stated that there is a worrying gap between what the UK's biggest banks are publicly saying about climate and what they are lobbying for behind closed doors. As the UK banks continue to navigate their climate strategies, investors and regulators will closely monitor their actions to ensure alignment with their public commitments and the UK's ambitious climate goals.
| Bank | Climate Commitment | Fossil Fuel vs Green Financing (2020-24) | Recent Actions / Lobbying Context | |----------|----------------------------|-------------------------------------------------------|------------------------------------------------------------------------| | Barclays | Net zero by 2050 | More financing to fossil fuels than green projects | Engaged in UK consultation on transition plans (implied) | | HSBC | Net zero by 2050 | More fossil fuel financing; exited NZBA | Prioritizes pragmatic solutions; engages with GFANZ; lobbying implicit | | Lloyds | Net zero by 2050 | More financing to fossil fuels than green projects | Engaged in UK consultation on transition plans (implied) | | NatWest | Net zero by 2050; increased climate finance commitment ($267bn) | Funded relatively more green projects than peers, but still more fossil fuel funding overall | Leading with higher green finance focus; involved in UK sustainable finance framework discussions |
- Politicians, investors, and environmental groups are expressing concerns about the discrepancy between the net zero by 2050 commitments of UK banks and their financing activities in the energy sector, particularly their funding of oil and gas companies over green companies.
- The Energy Finance Forum has found that all four major UK banks - Barclays, HSBC, Lloyds, and NatWest - collectively financed high-emitting industries more than green industries from 2020 to 2024, making up 20.3% of total identified fossil fuel financing.
- As the UK government moves to establish the country as a "green finance capital" by mandating disclosure of climate transition plans for financial institutions, the business and finance industries are undergoing scrutiny to ensure they align their actions with their public net zero commitments and the country's ambitious climate goals.
