Europe's banks under pressure to act on CO2

Declarations of intent to reduce CO2 predominate without concrete plans/German banks relatively well positioned thanks to smaller shares in greenhouse-intensive sectors

When it comes to CO2 reduction, Europe's top 50 banks face the comprehensive challenge of transforming themselves and accompanying their customers in this process.

At the same time, as financial intermediaries with a CO2-focused agenda, they have the opportunity to become a key player in the transformation of European economies towards greater climate-friendliness and sustainability. Against this backdrop, according to our recent study, while the vast majority of institutions (94%) committed early on to the goals of the 2015 Paris Climate Agreement, only half of lending institutions can yet demonstrate clear targets for a CO2-neutral portfolio.

As the preliminary version of the second edition of the European Banking Study (EBS) also shows, declarations of intent have so far remained the order of the day at European level with regard to CO2 emissions. Only a few institutions have made a comprehensive disclosure of total financed greenhouse gas emissions by mid-2021, and only five banks show concrete, action-based plans for reducing CO2 emissions in their portfolios.

Dr. Dirk Holländer, co-author of the European Banking Study and Senior Partner at zeb, elaborates: "Numerous European top 50 banks have significant financing shares in sectors with high greenhouse gas emissions. The quantification and consistent reduction of these emissions over the next decades is already putting the institutions under considerable pressure. If the players do not succeed quickly, a comprehensive intervention by politicians and supervisors with corresponding regulations is not likely to be long in coming."

Initial results of the second edition of the European Banking Study 2021 also revealed that German banks have a better average carbon footprint than their competitors due to their overall smaller portfolios in greenhouse-intensive industries. However, not all institutions make sufficient use of this initial advantage to differentiate themselves from the competition. The authors of the study therefore suggest that German institutions should be more proactive in exploiting their current lead and follow up their declarations of intent with concrete measures to reduce CO2 emissions as soon as possible.

Dr. Frank Mrusek, co-author of the EBS and Senior Manager at zeb, concludes: "Banks with less CO2-intensive sectors in their portfolio are currently at an advantage. They should seize this opportunity to set standards as trendsetters and push the entire industry forward on its difficult and challenging path towards more climate neutrality and sustainability."

The current analysis is the first part of the second edition of the European Banking Study 2021, focusing on quantifying the CO2 emissions of Europe's top 50 banks. The full study will be published at the end of August. More information can be found here.