Mortgage – UK banks to launch wave of green products
British banks are launching a wave of climate-change products and tightening lending standards amid criticism over their slow response to global warming.
The UK’s largest lenders, HSBC, Barclays, Lloyds and NatWest, have failed to impress campaigners, despite ambitious statements about their commitment to reducing carbon emissions in 2020.
“UK banks have talked the talk on climate, but their actions have fallen short,” said Simon Youel, head of policy and advocacy at Positive Money, which promotes a fairer financial system.
Although critics have homed in on HSBC and Barclays over financing fossil fuel companies, retail-focused lenders are also grappling with how to cut their indirect carbon footprint linked to mortgage lending.
Dutch bank ABN Amro says its mortgage book causes more greenhouse gas emissions than its lending to mining or industrial companies.
Lloyds and NatWest have both pledged to halve the emissions linked to their loan books, but have yet to work out how high their emissions are.
“The government wants disclosure to be mandatory across the whole economy by 2025 anyway, [so] banks should have done this already,” Mr Youel said.
Some bankers admit the industry has some catching up to do after years of complacency.
Speaking at the Financial Times global banking summit, Barclays chairman Nigel Higgins said: “If you wind the clock back, we along with lots of other people . . . have been slower than, with hindsight, we should have been to address the climate challenge.
“Nobody can be happy looking at where we are today and be pleased with the amount of progress we’ve made since this topic first moved centre stage.”
With the UK preparing to host the UN COP26 climate summit in Glasgow at the end of 2021, scrutiny of the banks is likely to intensify with campaigners and politicians already stepping up the pressure.
Bankers for Net Zero — an initiative backed by an influential group of MPs — in December started pushing banks to sign up to a list of climate commitments that it says would be “the most ambitious in the world”.
A month earlier, in his first big speech on financial services since taking over as chancellor, Rishi Sunak said the industry should be a “critical enabler” of the country’s shift toward net zero carbon emissions.
But bankers warn there are limits to how much banks could do alone.
“The UK needs to put in place the right infrastructure and environment to allow companies to do the things they need to do,” one executive said.
Still, banks are optimistic they can accelerate progress in meeting climate goals as they gear up for a series of announcements and new product launches in 2021.
Barclays said a new “carbon limit” on the amount of activity it finances will force it to lower emissions, despite its refusal to halt lending to fossil fuel businesses completely.
The limit is designed to come down gradually each year, but the bank said it would be tight enough to force immediate “difficult decisions” about who to lend to.
NatWest made combating climate change a key pillar of its rebrand under new chief executive Alison Rose, and launched the UK’s first “green mortgage” in November, offering lower interest rates to borrowers if they bought a more energy-efficient home.
In 2021, however, it aims to target a much larger customer base by allowing customers to fund green home improvements at cheap rates through their existing mortgage.
Lloyd Cochrane, NatWest head of mortgages, said: “The green mortgage for new customers was the first priority because it was a relatively simple change, but we’re working on how we can help our 1.2m existing customers.”
Lloyds is active in funding the renewable energy sector, but early efforts in retail banking have been more limited, focusing on online tools to encourage homeowners or property developers to take action themselves.
However, the group plans to reveal more detailed emissions data and explicit targets in February.
As well as being the UK’s largest mortgage lender, Lloyds is one of the country’s biggest providers of car finance and is looking to expand its lending for electric vehicles, according to a person familiar with its plans.
Smaller companies are also attempting to innovate.
In January, recently licensed Oxbury Bank will open the first “carbon offset savings account”, which will use the money that savers would traditionally earn in interest to fund tree-planting projects.
Kevin Hollinrake, a Conservative MP and chair of the all-party parliamentary group on fair business banking, said banks should provide more regular information on the impact of their lending. They also need to reassess the ways they measure risk.
“Over the past year the banking sector has made progress in acknowledging its role in climate change and making high level commitments . . . But this has only taken us to the start line. The hard work now begins, and we cannot underestimate the scale of the challenge ahead.”