Lloyds says financial firms are taking the climate crisis seriously. Is this really the case?

The bank this morning releases research showing twice as many UK financial institutions consider environmental sustainability and tackling the climate crisis to be a top strategic priority compared to last year. But ShareAction says most banks are barely at the starting line when it comes to net zero, writes James Moore

The corporate colours of Lloyds are green but is the banking industry? (PA)

We’re taking the climate crisis seriously, says the financial services industry, the members of which are terribly fond of using pictures of forests on their websites to show just how jolly green they are. But is this really the case?

Lloyds Banking Group says financial firms are at least starting to get with the programme. The bank today releases research showing that twice as many UK financial institutions (59 per cent) consider environmental sustainability and tackling climate change to be a top strategic priority compared to a year ago (33 per cent).

More than two-fifths (43 per cent) are also planning to make their environmental sustainability goals more ambitious over the next 12 months. Nearly half (49 per cent) say the proximity of Cop26 – the United Nations climate change conference – in Glasgow this year has increased their focus on environmental sustainability.

The findings are included in the bank’s sixth annual Financial Institutions Sentiment Survey, which gathers views from banks, asset managers, insurers and intermediaries. They are based on interviews with 111 “senior leaders”, conducted between 15 June and 19 July.

Separate research has also found that the market for green and sustainability-linked financing across UK banking is growing at a rapid clip.

Well huzzah!

Trouble is, a rather different picture emerges from ShareAction, a pressure group that seeks to utilise the investment system to drive change. It produced its own research focusing on the banking sector across Europe, including the UK, at the beginning of last month.

Its findings aren’t entirely out of step with those of Lloyds. Of the 25 biggest banks, 20 had a stated commitment to join the race to net-zero by 2050.

The fly in the ointment is that very few had done much in the way of taking concrete steps towards achieving their lofty goals.

Only three – to its credit, Lloyds, along with NatWest and Nordea – had committed to halving their financed emissions by 2030, for example. This measure, ShareAction says, is a vital step towards meeting the 2050 target.

Eight banks had interim targets for the most carbon-intensive sectors, but only three used an absolute emissions metric, or complemented targets with additional financed emissions disclosures, to ensure they lead to an actual decrease in emissions.

ShareAction found holes with respect to polices on coal, and also criticised the industry’s approach on biodiversity as well as on biomass power, the expansion of which damages the prospects of achieving the goals of the Paris accords.

In other words, while the banks have mostly turned up at the starting line, they are failing to react to the starter’s gun. Events like the recent naked protests staged by Extinction Rebellion would appear to be justified until that changes.

It is true that asset managers are moving in a more assertive direction, increasingly using their votes to voice their displeasure with regard to the climate policies of investee companies.

A new breed of activist shareholder has also been creating trouble for a deeply recalcitrant oil industry. Follow This has submitted climate resolutions at a number of AGMs. It’s important to note that these have secured the backing of some institutional investors that wouldn’t have dreamt of voting in favour of dissident resolutions a few years ago. This would appear to back up the asset manager part of Lloyds’ research.

But once again, the pace of change is nowhere near quick enough.

That more financial firms see environmental sustainability as important is welcome. It counts as a necessary first step.

But there is still a yawning gap between this and taking meaningful action to ensure the goals of the Paris accords are realised.

It bears repeating that the businesses of financial institutions, and the economies they rely on, will be badly damaged if this doesn’t happen.

Yet companies still give the impression of trying to have it both ways: talking up their commitment to the climate while at the same time making money from destructive activities. Greenwashing is still too much in evidence.

This is simply not good enough. They need to join the race.