Danske Bank, Barclays, Nordea and Citi among lenders with best performance on financed CO2 emissions, finds Bloomberg Intelligence

by | Nov 7, 2022

New BI Carbon Scores for banks outline leaders as well as need for improved data disclosure and transparency

Of the 54 global banks analysed as part of Bloomberg Intelligence’s (BI) Carbon Score, Danske Bank, Barclays, Nordea, and Citigroup are leading, indicating the best combination of both current and forecasted performance on financed CO2 emissions. According to BI’s new analysis to date only 14 (26%) banks, including Citigroup, BNP Paribas, and Santander, have set interim 2030 targets for their power generation and oil and gas lending that are consistent with an International Energy Agency (IEA) Net Zero by 2050 pathway. Nearly 75% of the top 54 global lenders have committed to align their lending portfolios with net-zero targets by 2050 as part of the Net-Zero Banking Alliance. Based on BI’s forecasts, financed emissions from oil and gas (the loan recipient’s Scope 3) and power (the recipient’s Scope 1) lending for the 41 companies with reduction targets will decline to 315 million metric tonnes in 2030 from 430 million in 2019. However, recent lending to these sectors has increased from $150 billion in 2020 to nearly $200 billion to date in 2022. Eric Kane, Director of ESG Research, Americas at Bloomberg Intelligence, said: “Based on our analysis of more than 50 top global lenders, roughly 60% are yet to report any absolute financed emissions data. In short, banks’ disclosure is yet to match their carbon ambitions. Limited emissions reporting from portfolio companies is a stated obstacle for banks to calculate financed emissions. However, those that are committing to reach net zero should make financing conditional on these disclosures.” The majority of banks that are reporting only provide emissions data for their loans to the oil and gas sector. This lack of disclosure hampers investors’ ability to fully understand current performance and track progress towards 2030 and 2050 targets. More than half of the banks in BI’s peer set lent to coal companies between 2016 and 2021, however the majority of these loan recipients are private, making calculations of the associated financed emissions impossible due to the lack of production data. “Given the current lack of disclosure on financed emissions, this work is critical in understanding how banks are performing now and where we expect them to be in the future,” added Kane. On the upside, based on Bloomberg’s league tables data {LEAG<GO>} for the top 54 global lenders, loans to coal companies have decreased by more than 90% to roughly $215 million from 2019-2022. The data may be a bellwether for future financing trends, with all but 11 companies in the peer set planning to limit or exit coal financing. Coal-fired power generation accounts for roughly 30% of global energy related CO2 emissions. Figure 1: Power, oil & gas financed emissions vs IEA NZE

Source: Bloomberg Intelligence

While many banks have pledged to limit their financed emissions, the industry is also capitalizing on the opportunities associated with sustainable finance. BI’s analysis reveals that nearly 80% of the banks in the set have sustainable finance targets covering topics including energy transition, social projects, and the UN’s Sustainable Development Goals. Despite a lack of disclosure from many banks on their emissions, Bloomberg Intelligence used various methods to conduct its analysis, such as the inclusion of Bloomberg’s LEAG data to derive financed emissions by applying an attribution factor (loan value divided by portfolio company’s enterprise value including cash (EVIC)) to the borrower’s emissions (consistent with methodology from the Partnership for Carbon Accounting Financials (PCAF)). The analysis’ current performance measures reductions in financed emissions intensity from the oil & gas and power generation sectors – based on million metric tons CO2e divided by total loans in trillions – over the latest five-year period and current intensity. Forecasted performance is based on publicly reported financed emissions targets, and measures future reduction, intensity, and distance from a 2030 benchmark based on the International Energy Agency’s Net Zero by 2050 scenario. An executive summary of BI’s Lending Against the Climate’s Future report is available via the following link. Bloomberg Terminal subscribers can access the full report via {BI<GO>}. BI’s carbon emissions data for banks is part of Bloomberg’s larger offering of carbon emissions data covering 100,000 companies.

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