UK financial institutions invest £119bn in fossil fuel industries in contrast to their promised green commitments
Despite commitments to reach net zero emissions by 2050, UK banks such as Barclays, HSBC, and Lloyds are financing more fossil fuel companies than green companies, according to a report by InfluenceMap.
The report, which assessed the UK's four largest banks—Barclays, HSBC, Lloyds, and NatWest—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 financial sector's slow transition to renewable energy is influenced by several factors, including economic motives, existing infrastructure, regulatory gaps, and market pressures. Major banks have historically found fossil fuel investments to be profitable, making it difficult for them to abandon these projects entirely. The transition to renewable energy requires significant investment and time, which can lead to short-term financial challenges.
Moreover, many of these banks have extensive existing infrastructure and portfolios that are heavily invested in fossil fuels. This makes it challenging to rapidly divest from these sectors without significant economic impacts on their balance sheets.
The reliance on voluntary climate commitments by banks often leads to inconsistent results. There is a need for stronger regulatory frameworks to ensure that banks' actions align with their climate ambitions. Without stringent regulations, banks may continue to prioritize fossil fuel investments over green initiatives.
Investor expectations and market pressures can also influence banks' decisions. If investors demand returns from fossil fuel investments, banks may feel compelled to continue supporting these sectors despite their long-term climate commitments.
The report revealed that 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. Between 2020 and 2024, the funding ratio of fossil fuel companies over green companies was 3.1 to 1 for Lloyds, 2.9 to 1 for HSBC, and 1.8 to 1 for Barclays.
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. 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.
Investors have expressed their concerns about fossil fuel financing. At the Barclays AGM on 7 May, concerns about fossil fuel financing were raised. 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.
Jeanne Martin, head of the banking program at ShareAction, stated that there is a worrying gap growing between what the UK's biggest banks are publicly saying about climate and what they are lobbying for behind closed doors. Bonnie Steinberg, senior analyst at InfluenceMap, stated that the banks' continued financing of expansionary oil and gas companies and their pushback against sound climate-related financial policy only worsen the long-term risks these banks face.
In their engagement with government policy, only NatWest and Lloyds recognised the risks of greenwashing and carbon lock-in associated with increased financing to high-emitting sectors. A total of £119bn in financing was given to the fossil fuel sector by UK banks between 2020 and 2024, spread across 1,183 individual deals with 354 companies. In contrast, total financing for green companies stood at £59.7bn between 2020 and 2024.
In conclusion, the report highlights the need for UK banks to accelerate their transition to renewable energy and align their financing decisions with their climate ambitions. Investors must engage with banks on this critical issue and take action if it is clear banks are working to counter regulations that we urgently need to better protect people and the planet.
The financial sector's continued funding of high-emitting industries such as oil and gas, as seen in the cases of Barclays, HSBC, Lloyds, and others, contradicts their commitments to net zero emissions by 2050. The reliance on fossil fuel finance over green initiatives, as shown by the high funding ratios for fossil fuel companies compared to green companies, indicates a slow transition to renewable energy in the industry.
