NatWest first UK bank to get climate claims backed by science
NATWEST Group became the first UK bank to have its emissions-reductions claims approved by the Science Based Targets initiative (SBTi), as such certifications take on greater importance for a growing number of investors.
The lender published its goals on Friday (Dec 16), and SBTi confirmed it has approved the figures, which are in line with NatWest’s target of halving the climate impact of its financing activities by 2030 and aligning with the objectives of the Paris climate agreement. The bank aims to reduce greenhouse gas emissions from its residential mortgage portfolio by 49 per cent per square meter by 2030, compared with a 2019 baseline, and to cut emissions from commercial real estate loans by 60 per cent per square meter over the same period.
Banks are major contributors to global warming via their financing and lending activities. As enablers of greenhouse gas pollution in the real economy, the industry is under pressure from climate activists and some investors to reduce support for high emitting sectors and support efforts to keep the global rise in temperature to 1.5 deg C.
“The NatWest target is really significant from our perspective,” Nate Aden, head of the finance unit at SBTi, said in an interview. “Not only is NatWest the largest bank to have a validated science-based target and the first UK based bank to have a validated science-based target, but they’ve also upped the bar.”
SBTi, which is a collaboration between three non-profits and a United Nations group, is widely seen as the gold standard for corporate climate goal-setting. The entity judges whether a company’s stated plans to cut emissions are achievable. It’s created a framework for assessing the finance industry’s short-term targets and is working on another for net-zero plans.
The finance industry has been slower than other sectors of the economy to make emission-reduction pledges, but that’s changing amid investor pressure and regulatory scrutiny. Many of NatWest’s peers “are there in the wings”, Aden said.
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The bank’s validation “really sets a precedent for the large banks because there was some debate from some of the large banks about the viability of SBTs for their loan books and for their business models. And this really is proof of concept that not only is it feasible, but they’re raising the bar with their target.”
Aden said the number of financial institutions getting in line for similar certification is growing. “We have 40 that are in the pipeline right now in terms of having submitted their targets to us, and it’s growing very, very quickly. Our largest month so far was last month where we had seven validations, but I’m expecting we’ll get to 10 a month pretty early next year and then just keep going.”
Alison Rose, chief executive officer of NatWest Group, said the approval of her bank’s targets “is an important step in our journey to implement our purpose-led strategy and ambition to be a leading bank in the UK helping to address the climate challenge.”
NatWest also said it plans to reduce emissions from its electricity generation project finance portfolio by 76 per cent per megawatt hour by 2030 from a 2019 base year, and it aims to cut emissions from the cement sector within its corporate loan portfolio by 67 per cent per tonne by 2030. BLOOMBERG
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