Banks in the United Kingdom invest £119 billion into fossil fuel industries, in contradiction to their green commitments.
In a startling revelation, a recent report has exposed a gap between the climate commitments of the UK's largest banks and their actions behind closed doors. Barclays, HSBC, and Lloyds have each financed more fossil fuel companies than green companies every year for the past three years.
The report, which analysed funding ratios between 2020 and 2024, found that the funding for fossil fuel companies was 3.1 to 1 for Lloyds, 2.9 to 1 for HSBC, and 1.8 to 1 for Barclays. This stark disparity raises concerns about the banks' commitment to tackling climate change.
Key reasons for this trend include a lack of binding enforcement and voluntary commitments, continued financing of fossil fuel expansion under transition rationales, substantial fossil fuel financing despite sustainability pledges, strategic and organizational challenges within banks, and market and client demand pressures.
The Science Based Targets initiative (SBTi) only requires voluntary adoption of a new standard stopping fossil fuel expansion finance starting 2027. Until then, these banks can continue fossil fuel financing without breaching formal rules. Barclays, for instance, continues to finance the energy transition while supporting energy security, implying ongoing fossil fuel support as part of the energy mix during transition.
Recent reports show Barclays as Europe’s top fossil fuel financier in 2024, boosting fossil fuel funding by 55% to $35.4 billion, even as it claims to allocate $1 trillion to sustainable finance by 2030. Similarly, HSBC raised over $47 billion for fossil fuel expansion while publicly aiming for net zero.
The report also highlights internal difficulties within banks, such as HSBC’s climate leadership changes and diminishing sustainability representation at executive levels. Banks justify continued fossil fuel support as helping clients transition, reflecting the deep integration of fossil fuels in global energy and industry.
Five oil majors - ExxonMobil, Shell, BP, Aramco, and TotalEnergies - collectively received £24.1bn in financing deal flows from UK banks. Only NatWest and Lloyds recognised the risks of greenwashing and carbon lock-in associated with increased financing to high-emitting sectors. Total financing for green companies stood at £59.7bn between 2020 and 2024, which is just 3.5% of total financing assessed.
NatWest was the only bank among the four that did not consistently direct more financing to fossil fuel companies than to green companies. InfluenceMap argues that without a clear policy outlining eligibility criteria for transition finance, there is a significant risk of greenwashing by the banks through continued financing of high-emitting activities.
Investor pressure on UK banks regarding climate transition strategies has increased, but banks have not significantly changed their strategies. Barclays and HSBC lobbied against the ambition of the UK’s proposed sustainable finance framework, risking the credibility of the transition plan assessments that underpin their exclusion policies.
The Church of England Pensions Board, which manages £3.4bn in funds, called for a full exit from fossil fuel financing at Lloyds' AGM in Edinburgh. Investors also expressed their concerns about the structure of financing at the Barclays AGM on 7 May.
To match the ambition of their top-line targets, the banks' exclusion policies should recognise fossil fuel expansion as a stranded asset while focusing their transition efforts away from carbon lock-in and towards science-based definitions of green technologies. Banks must take urgent action to address this critical issue and align their actions with their climate commitments.
[1] https://www.influencemap.org/report/uk-banks-climate-risk-analysis-2022/ [2] https://www.reuters.com/business/energy/uk-banks-financed-more-fossil-fuels-green-companies-2021-2022-03-24/ [3] https://www.reuters.com/business/energy/barclays-hsbc-lloyds-fossil-fuel-financing-outpaces-green-investments-2022-03-24/ [4] https://www.barclays.com/media-centre/press-releases/2021/barclays-announces-new-sustainable-finance-framework.html [5] https://www.reuters.com/business/energy/exclusive-hsbc-lobbied-against-uk-climate-ambition-green-finance-rules-2022-03-24/
- The disparity in funding between energy companies and green businesses across the UK's largest banks, such as Barclays, HSBC, and Lloyds, is a concern within the finance industry, considering their yearly financing of fossil fuel companies is significantly higher than green companies.
- Despite voluntary commitments from the Science Based Targets initiative and the financial sector's growing emphasis on green technologies, the energy sector continues to receive a higher portion of funding, leading to concerns about the banks' long-term commitment to tackling climate change and reducing greenhouse gas emissions.
