(Bloomberg) -- BNP Paribas SA, Banco Santander SA and Barclays Plc stand out as the best among banks in terms of their current and forecast financed CO2 emissions, according to analysts at Bloomberg Intelligence.
Financed emissions are a measurement of greenhouse gases associated with a bank’s investments and lending activities to some of the most carbon-intensive industries. The data can be used to help determine a financial institution’s overall carbon footprint.
Just 28 of the 53 largest global banks tracked by BI have set financed-emissions reduction targets for 2030 for the oil and gas, power generation, cement and steel industries that align with the benchmark for the International Energy Agency’s net zero by 2050 roadmap.
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Lending to these sectors fell 41% in 2023, driven by oil and gas-lending reductions. Going forward, the expectation is that assuming the banks don’t have “exclusion policies” in place, financing will increase as cash flows ease for most fossil-fuel companies and the reliance on bank funding rebounds, said BI analyst Grace Osborne.
The big European banks were the clear frontrunners based on BI’s most recent data from 2023, in terms of having the best mix of current and forecast financed-emission performance.
That’s partly tied to European Union regulations that require banks to assess their material risks, including nature-related losses. The European Central Bank can intervene in cases, including imposing fines, when it determines that the way a lender is managing climate or environmental risks is deficient.
Regulations and political pressures are “diverging massively” between the EU and the US, and that’s resulting in “completely diametrically opposing pressures on banks,” Osborne said.
The result is that most of the largest European banks have better BI Carbon Scores than their US competitors. For example, BNP Paribas’ score is 8.96, compared with Citigroup Inc.’s 7.33; and Santander’s score is 8.85, topping Goldman Sachs Group Inc.’s 6.92. JPMorgan Chase & Co.’s score is 6.29, Bank of America Corp.’s is 5.16 and Wells Fargo & Co.’s is 5.40.
BI notes that due to a lack of comprehensive data, it uses various calculations to produce carbon scores. This includes incorporating Bloomberg’s league-table data to derive financed emissions from the banks lending activities and applying a so-called attribution factor to the banks’ emissions using the same methodology as the Partnership for Carbon Accounting Financials. For oil, gas and coal companies, BI focuses on Scope 3 emissions, calculated by applying a CO2 coefficient to the companies’ production from a given year.
Looking to the future, NatWest Group Plc and National Australia Bank Ltd. are among the industry leaders in terms of relative ranking for future cuts in financed emissions, Osborne said. NAB, for example, has set targets for five of the most carbon-intensive industries and loans to those sectors represent only 1% of the bank’s loan book, far below the peer-set average of 33%, she said.
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