Banks remain too open to coal and fossil fuel financing: TPI report

No bank has fully ruled out all coal financing in line with a 1.5ºC scenario, and just 8% are committed to ending the funding of new oil and gas fields, according to a Transition Pathway Initiative (TPI) report highlighting “huge gaps” in banks’ climate policies.

The TPI Centre looked at the fossil fuel financing policies and climate performance of 26 major international banks – including the likes of Barclays, BNP Paribas, HSBC, ING, Mizuho, JP Morgan Chase and Goldman Sachs – ten US super-regional banks, and two US custodian banks, and concluded that “the overwhelming majority of banks are still in the early stages of their transition to a low-carbon economy”.

Banks’ climate targets and disclosures are still incomplete

This is despite the fact that most banks now have a net zero emissions commitment and are now disclosing some of their financed emissions. The TPI Centre attributes the lack of progress to the limited scope of net zero targets, which often exclude material business segments and capital market activities. Overall, the study estimates that banks’ climate targets cover less than 22% of their total revenues.

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Disclosures also remain insufficient: while some banks disclose their credit exposure to high-emission sectors, no bank discloses its revenue exposure. “The lack of bank disclosures related to the exposure of their credit and revenue to high-emission sectors impedes stakeholders’ ability to assess banks’ potential vulnerability to transition risks,” warns the TPI Centre.

In addition to the low levels of commitment to phase out fossil fuel financing, no bank is committed to ending all activities that finance deforestation by 2025, and no bank has explicitly committed to decarbonise their activities in line with just transition principles. 

‘Banks are not moving fast enough’ on climate goals 

Simon Dietz, Research Director at the TPI Centre and Professor of Environmental Policy, Department of Geography, London School of Economics, said: “While some progress has been made since our initial assessments in 2022, banks are not moving fast enough to meet global climate goals. Without stronger action, the banking sector exposes itself — and by extension, the global economy — to greater regulatory, market, and physical risks associated with climate change.” 

The report used the TPI Centre’s Net Zero Banking Assessment Framework (NZBAF), which was developed in collaboration with investor networks, Institutional Investor Group on Climate Change (IIGCC) and Ceres and looks at elements such as net zero commitments, sectoral targets, decarbonisation strategies, climate policy engagement and climate governance.

On average, the 38 banks assessed in 2024 scored on only 15% of the 72 sub-indicators that make up the NZBAF, and no bank scored on more than half of the sub-indicators.

Just 3% of banks sectoral targets aligned with 1.5ºC pathway

The authors then assessed banks’ carbon performance, or the alignment of their climate targets with sectoral benchmarks. They found that only 19% of banks’ sectoral pathways are aligned with temperature goals of 1.5°C or below 2°C in the medium term (2028-35), and just 3% are aligned with a strict 1.5ºC benchmark.

Banks also lack short and long-term targets to solidify their pathway to net zero by 2050. 

European and Japanese banks fare better than their North American peers in general, having set more sectoral decarbonisation targets. Meanwhile, Chinese banks have not yet set any sectoral decarbonisation targets. 

Of the banks assessed Barclays, BNP Paribas, Groupe Crédit Agricole, HSBC, ING Bank and JP Morgan Chase stood out as having the most targets, while ING, Deutsche Bank and JP Morgan Chase have the highest number of targets aligned with temperature goals of 1.5°C and below 2°C in the medium term (by 2035).