Some of the UK’s biggest high-street banks have been put in a “red” warning category based on new Which? analysis of their fossil fuel investments and green policies.
The consumer champion examined the environmental policies of 13 of the UK’s leading current account providers with only three earning the Which? Eco Provider badge.
Of the 1,463 Which? members that were asked in January, seven in 10 (69%) picked opening an account with a sustainable bank as the least important way to tackle climate change, from a list of options that also included flying less and recycling. However, the 60 largest banks reportedly ploughed $669 billion into the fossil fuel industry in 2022 alone – and many UK high-street banks are among the worst culprits.
Banks can finance fossil fuels in a variety of ways: through project finance (lending to fossil fuel companies for specific projects), general corporate lending and capital markets activity such as underwriting.
Six banks are classified in the “red” category, JPMorgan Chase, Santander, Barclays, HSBC, NatWest (includes RBS) and Lloyds (includes Halifax and Bank of Scotland), following Which? and Reclaim Finance (a non-profit research organisation) analysis of their fossil fuel policies – which were broadly found to be too weak – and statements on agricultural commodities such as beef, soy, timber and palm oil.
Of the banks that do finance the fossil fuel industry (rated red), there are differences in financing, policies and promises. Two of them, Lloyds and NatWest, are less involved in these sectors than their peers.
Which? researchers also considered transparency levels and whether banks had credible targets to reduce exposure to environmentally damaging sectors, and checked whether they publish independently verified data.
The three banks labelled Which? Eco Providers are Nationwide, The Co-operative Bank and Triodos. They have no exposure to fossil fuels in their banking activities.
JPMorgan Chase was one of the banks labelled “red”. Since the Paris Agreement, it has financed more fossil fuels than all the banks Which? assessed put together, and got the lowest score for positive environmental impact. It contributed $434.15 billion to fossil fuel financing between 2016 and 2022 and received a total score of just 16 per cent.
However, it says it is targeting $1 trillion for green initiatives by 2030 to help ‘clients accelerate their low carbon transition’, and was ‘the first large US bank to establish 2030 portfolio-level emissions intensity reduction targets.’
Santander does less fossil fuel financing than similar-sized banks, but it has low scores for its stance on fossil fuels and agricultural commodities. It said it has ‘set emission reduction targets for 2030 across a range of material emitting sectors, including steel, aviation, power generation, thermal coal, and energy (oil and gas).’
Barclays is Europe’s biggest fossil fuel financier. However, it is the only bank that Which? looked at to set 2025 targets for power and energy and has provided more than £87 billion of green finance since 2018. It said: ‘Barclays can make the greatest difference by working with customers…as they transition to a low-carbon business model’, noting firms that do not reduce emissions ‘may find it hard to access financing.’
HSBC (including First Direct) is one of the biggest backers of fossil fuels in the UK, although it has updated its energy policies and pledged to stop funding coal expansion. It said: ‘We were one of the first banks to set a net-zero ambition in 2020…We will no longer provide new finance or advisory services for the specific purposes of new oil and gas fields, or for the most carbon-intensive oil assets.’
NatWest (including Royal Bank of Scotland) has taken strides to reduce its exposure and set ambitious targets to reduce emissions, but it still funds fossil fuels. It says it will lend to companies with a ‘climate transition plan’ in line with the Paris Agreement, however, this potentially allows too many loopholes.
Lloyds’ (including Halifax and Bank of Scotland) exposure to fossil fuels is minor compared with peers, and it has higher scores than the other big fossil fuel funders, but it does not yet exclude all financial services for firms with oil/gas expansion plans. It said: ‘We are actively working with oil and gas clients to establish credible transition plans by the end of 2023. We know time is critical.’
Nationwide Building Society, which is one of three banks named a Which? Eco Provider, mainly funds residential mortgages so it does not invest in, or lend to, the fossil fuel industry. It discloses the carbon emissions associated with its mortgage, commercial real estate and registered social landlord lending, and has set science-based targets to reduce all three. It said: ‘We have committed to playing our part in the transition to a net-zero future. This is just one of the ways we demonstrate our mutual difference.’
The Co-operative Bank sets high ethical standards for the businesses it offers services and finance to, most of which are small and medium sized. It excludes firms involved in the exploration, extraction or production of fossil fuels, and the unsustainable harvest of natural resources. It told Which? it includes parent companies within its ethical review of firms, excluding those with unethical policies both in and out of the UK.
Triodos refuses to lend or invest in fossil fuel projects, and focuses its lending on renewable energy. It also excludes companies that mine coal, build coal plants, produce energy from fossil fuel power plants, or extract and produce oil and gas. It said: ‘We also go beyond exclusion and actively look for positive impact…delivering positive change for people and planet.’ Triodos shares a list of its UK and global loans on its website.
Sam Richardson, Deputy Editor of Which? Money, said:
“Consumers seeking to make more sustainable choices might want to consider switching banks if they are uncomfortable with their money being invested in the fossil fuel industry and other projects which could be damaging to the environment.
“By choosing one of Which?’s three Eco Providers, customers can feel confident that their bank has impressive green credentials and steers clear of investing money in coal, oil or gas.”
Notes to editors
What about other banks?
Other banks in Which?’s assessment do not finance or have very limited exposure to fossil fuels, but they do not have comprehensive public policies and were rated “amber”.
- Metro Bank: Does not lend to businesses involved in metal ore and coal mining, oil and gas extraction, fossil fuel power or deforestation. It focuses on community banking, and commercial lending is predominantly to small and medium-sized UK businesses. As with other banks mentioned here, it does not publish detailed public policies, so did not qualify for Eco Provider status.
- TSB: Does not carry out investment banking or offer big corporate finance, so it is not directly involved in funding fossil fuels. But it is owned by Spanish banking group Sabadell, which does have fossil fuel exposure. TSB told Which? it is committed to tackling climate change and delivering a ‘just green transition’, and aligns to recognised standards and targets.
- Starling Bank: Specifically prohibits companies linked to mining and commodities (including the sale, distribution or production of oil, fuel, wood, gas, charcoal and coal), but it lacks detailed public policies. It said being branchless and paperless means it has a low carbon footprint and it offsets all the emissions from its own operations and supply chain.
- Virgin Money: Will not lend to higher-risk sectors such as oil and gas extraction, coal mining and coal-fired power generation. It has low exposure to oil and gas field services provided to the fossil fuel industry e.g. repair or maintenance of platforms or equipment used in extraction and transportation (0.2% of lending). Mortgages make up most of its lending. It does provide services for larger firms, and publishes emissions data for energy, manufacturing, transport and agriculture.
- The survey results are based on a survey of 1,463 Which? members on its online panel conducted in January 2023.
- Banking on climate chaos: Fossil fuel finance report 2023
Right of replies
A JPMorgan Chase spokesperson said:
“As one of the world’s largest financial institutions, we provide financing across the energy sector: supporting energy security, helping clients accelerate their low carbon transition and increasing clean energy financing with a target of $1 trillion for green initiatives by 2030. We were also the first large U.S bank to establish 2030 portfolio-level emissions intensity reduction targets, aligning key sectors of our financing portfolio with the goals of the Paris Agreement.
“Our approach is underpinned by our ongoing focus on accountability, transparency and engagement, reporting progress against key financing commitments and operational targets annually.”
A Santander Group spokesperson said:
“In line with our commitments as a member of the Net Zero Banking Alliance (NZBA), Santander has set emission reduction targets for 2030 across a range of material emitting sectors within our loan book, including steel, aviation, power generation, thermal coal, and energy (oil and gas). We publish our Climate Finance Report annually and constantly look to improve disclosure standards to align with the industry.”
A Barclays spokesperson said:
“As one of the first banks to set an ambition to become net zero by 2050, we are clear that addressing climate change is an urgent and complex challenge. We are using our entire franchise to support new green technologies and infrastructure projects that will build up low-carbon capacity and capability, having provided over £87bn of green finance since 2018. We have set a target to facilitate $1trn in Sustainable and Transition financing between 2023 and 2030 and we have set a mandate to invest £500m of our own capital into global climate-tech start-ups by the end of 2027.
“Integrating the IEA NZE2050 1.5°C-aligned temperature rise scenario, we have set 2030 targets to reduce the emissions that we finance in five high emitting sectors in our financing portfolio, including the Energy sector, where we have achieved a 32% reduction in our financed emissions since 2020.
“We believe that Barclays can make the greatest difference as a bank by working with customers and clients as they transition to a low-carbon business model, focussing on facilitating the finance needed to change business practices and scale new green technologies. This includes many oil and gas companies that are critical to the transition, and have committed significant resources and expertise to renewable energy. Where companies are unwilling to reduce their emissions consistent with internationally accepted pathways, they may find it difficult to access financing, including from Barclays.”
An HSBC spokesperson said:
“Climate change and supporting the transition is critically important to HSBC. We were one of the first banks to set a net zero ambition in 2020. Ours is particularly ambitious given our scale and footprint, and we have made good progress. Since we set out our net zero ambition we have updated our Thermal Coal Phase Out and energy policies and set ambitious financed emissions targets for 8 high emitting sectors in line with what the science says is required to stay on track for 1.5 degrees of global warming. In addition our 1.5 degree aligned financed emissions targets and updated energy policy mean we will no longer provide new finance or advisory services for the specific purposes of new oil and gas fields or related infrastructure, or for the most carbon-intensive oil assets.”
NatWest did not provide a spokesperson comment.
Lloyds Banking Group spokesperson:
“We have a key role to play in transitioning the UK economy towards net zero, and our focus is on playing our part in financing the transition as we help build a more sustainable and inclusive future for people and businesses. Our exposure to fossil fuels is minor compared to peers, but we are engaged in supporting the sector’s transition and are actively working with oil and gas clients supporting them to establish credible transition plans by the end of 2023. We know time is critical and the next few years will be decisive in tackling climate change and enabling the transition to a low carbon, more sustainable future for the UK.”
A Nationwide spokesperson said:
“We’re delighted to be recognised by Which? as a good choice for people looking for a greener financial services provider. As a building society, we do not invest in, or lend to, the fossil fuel industry and we have committed to playing our part in the transition to a net-zero future. This is just one of the ways we demonstrate our mutual difference and make a positive impact, in the communities we serve and wider society.”
A Co-operative Bank spokesperson said:
“We’re so pleased to have been recognised by Which? as one of only three Eco Providers, a testament to the longstanding commitment we’ve had since 1998 to withhold finance to any business whose activity contributes to fossil fuel extraction or production.
“Customers want their banks to operate with transparency. Despite this, we remain the only UK bank with an Ethical Policy, informed by the views of our customers. It sets out the activities we refuse to fund or provide banking services for and states the steps are taking to have a positive impact on our planet, on people and on our communities.”
Bevis Watts, chief executive of Triodos Bank UK, said:
“Thank you to the Which? team for the thorough research and analysis that they’ve completed looking at banks and sustainability. Triodos believes in creating a banking system that is sustainable, transparent and diverse – and holding banks accountable through independent research, such as this, plays a key role. The finance sector urgently needs to do what it takes to realise rapid and sustained global greenhouse gas emissions reduction and support biodiversity and restoring natural systems. This means ceasing fossil fuel expansion and halting deforestation, but also building renewable energy capacity, improving energy efficiency and electrifying energy systems as soon as possible. We’re pleased to be recognised for our leading exclusion policies around fossil fuels and commodities, but it’s important to note that we also go beyond exclusion and actively look for positive impact. We only invest and lend the money deposited with us to organisations that are delivering positive change for people and planet.”
A Metro Bank spokesperson said:
“Metro Bank is a community bank. We provide simple and straightforward retail, business and commercial banking services that meet the needs of our customers.”
Toni Coulson, Director of Asset Portfolios and Sustainability at Starling Bank:
“As a digital bank that is branchless and paperless, Starling already has a low carbon footprint for the sector. We are committed to reducing this even further, while offsetting all of the emissions from our own operations and supply chain annually by investing in carbon capture and avoidance projects that our employees choose.”
A TSB spokesperson said:
“TSB do not carry out investment banking or offer big corporate finance, so we are not involved in funding fossil fuels.
“The wider contribution that TSB makes to society is crucial to the continued success of our business. That’s why our strategy includes commitments to encourage financial inclusion, tackle climate change, deliver a just green transition, support small businesses to thrive, and champion diversity and inclusion – all aligned to recognised standards and targets.”
Virgin Money did not provide a spokesperson comment.
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