Leading FTSE 100 Sustainability Ranking Puts Banks in Top Ten But Warns Strategies to Meet Net Zero are Lacking
• Companies ranked in the top 10 include Barclays, NatWest Group and HSBC
• 100% of banks assess climate risks, with 83% reporting on mitigation strategies
• 45% of FTSE 100 are committed to Net Zero transition by 2050, but only 16% have a strategy to realistically meet the commitment
• Investor pressure is having a significant impact on corporate sustainability reporting
London, September 23, 2020 – EcoAct, the international climate and sustainability consultancy, has today released the 10th edition of its Sustainability Reporting Performance of the FTSE 100. The report, which includes a leader board ranking the top 20 companies for environmental sustainability disclosure reveals that although an increasing number of companies are setting a Net Zero target, there is an absence of a clearly defined strategy for many.
For those banks who have retained their rankings within the top 20 from last year, Nat West Group (formerly RBS) is up from position 15 to number 7, Barclays up from position 19 to number 8 and HSBC holding relatively steady up from position 16 to number 15. Lloyds Bank has also entered the top 20 for 2020, ranking at number 7.
Across the wider study, which assesses all companies in the CAC 40 (France), DOW 30 (USA) and the IBEX 35 (Spain), the financial sector (including banks, financial services companies and equity investment instruments) are highlighted for their performance in climate-related sustainability reporting, with the banking sector noted for being stronger that their other financial peers across several measures.
In the year that the World Economic Forum reported the top five global risks relating to climate change and the environment, the report found that the impact of global warming is becoming a key factor in financial risk analysis: 86% of financial companies are assessing climate risk, 79% provide further information but only 61% present mitigation strategies. In comparison, 100% of banks assess climate risk, with 92% providing further information and 83% reporting on how they are mitigating them.
As with most sectors in the study, the financial sector still hasn’t fully incorporated best practice climate risk assessments into their reporting. Only 57% are currently using scenario planning to assess different levels of climate risk. Banks lead the sector at 83%, but only 25% disclose details including which scenarios they used and the results.
Scores allocated to all FTSE 100 companies in the report range from 0% at their lowest to 92% at their best, demonstrating a highly disparate mix of sustainability performance and indicating that adequate climate-related reporting is still not a given in large companies.
“Over the ten years we have undertaken this research, we’ve continued to see year-on-year improvements to climate-related reported best practice”, said Stuart Lemmon, CEO, Northern Europe, EcoAct. “Although we are encouraged to see an uplift in company commitments to Net Zero this year, if we are to succeed in this goal, it is imperative that commitments are backed by sound and achievable strategy.”
Other key report findings:
Committing to net zero
While a few stand-out companies can be lauded for their commitments and actions, the financial sector overall still has some way to go in terms of committing to net zero, with only 57% of companies doing so, though this has improved from last year’s figure of 19%.
Across all indices, only 61% of financial actors have set a carbon reduction target but the majority – 71% - are on track, or very close to being on track to hit their target within the defined time frame. Banks specifically score better than their finance counterparts, with 92% having committed to a specific reduction objective, and 73% on track to meet their objective.
Science- based targets
Science-based targets (SBTs) are ambitious emission reduction targets aligned to a decarbonisation pathway to limit global warming to 1.5°C or well below 2°C as advised by climate scientists. The report shows that companies are more likely to be on track to meet carbon reduction targets if they set SBTs, but only 25% of finance companies have set an SBT while only a further 14% are planning to set one within the next two years. These low numbers – and the fact that none of these companies have an SBT that has been approved by the SBTi – can be explained by the fact that the Science Based Target initiative (SBTi) has not yet published a finance sector framework, though it plans to do so before the end of the year.
Investors driving change
A key driver for best practice reporting is increased pressure from investors demanding better climate-related disclosures as set out by The Task Force on Climate-related Financial Disclosures (TCFD), led by former Governor of the Bank of England, Mark Carney. Alignment to TCFD has increased rapidly from only 12% of companies across the international study in 2018 to 50% in 2020 as companies respond to investor demands for business climate risk assessments. Three quarters of finance companies are aligned to the TCFD in this year’s study.
Case study - NatWest Group
The UK-based bank has an ambitious goal – to be carbon positive by 2025 across its operations. It will achieve this with a 1.5°C-aligned SBT and verified carbon offsets to compensate for remaining emissions from 2020. The bank will maintain the same level of investment in carbon credits as they continue to decarbonise to achieve carbon positivity.
It was the first bank to commit to all three Climate Group Initiatives: RE100 by committing to use only renewable electricity across its global operations by 2025; EV100 by planning to install electric vehicle charging infrastructure and upgrading its car fleet to electric vehicles; and EP100 with a target to reduce energy consumption by 40% by 2025 from a 2015 baseline. As the wider banking sector comes under increasing scrutiny for the financing of fossil fuels, in 2020, the new Group Chief Executive, Alison Rose, stated in the company’s Annual Report that the bank is challenging itself to at least halve the climate impact of its investments by 2030, aiming to be “the leading bank in the UK & Republic of Ireland helping to address the challenges of climate change”.
COVID-19
As a consequence of COVID-19, much of the world’s industry went into lockdown the second quarter of this year and we witnessed a significant drop in CO2 emissions as a result. Although it is too early to measure the impacts to corporate emissions in this year’s report, it is estimated that overall emissions globally for 2020 will be down by 5-7%. However, EcoAct warns that with a shift to home working that needs to be accounted for, emissions reductions for businesses should not be assumed.
Next year the research will be looking at how companies have disclosed the impacts of COVID-19 on their emissions and expecting the climate leaders to be improving their strategies for Net Zero.
A copy of the report is available here: https://info.eco-act.com/en/sustainability-reporting-performance-ftse-100-2020
Notes for editors:
The research uses only publicly available information. The report defines sustainability as environmental sustainability rather than wider, social and governance issues. Companies are scored against 64 tailored criteria covering four subject areas: Measurement & Reporting; Strategy & Governance; Targets & Reduction; and Engagement & Innovation. The most recent disclosures are scored using annual integrated and corporate sustainability reports, and any additional links from company websites, including sustainability micro-sites and blogs.
About EcoAct
EcoAct is a privately held international sustainability consultancy and project developer, headquartered in Paris, with 160 employees in offices across France, the United Kingdom, Spain, the United States and Kenya. The company has unmatched depth and breadth in delivering holistic solutions to enable businesses to reduce their carbon emissions while driving commercial performance. EcoAct has undertaken carbon reduction and sustainability projects for some of the world’s leading brands while also developing and partnering with carbon offset, biodiversity and economic development programmes across Africa, Asia, China and South America. EcoAct is a CDP gold partner, a founding member of ICROA, a strategic partner in the implementation of the Gold Standard for the Global Goals and reports to the UN Global Compact.
For images or interview requests please contact:
Susan Brownlow
Media Relations Consultant
EcoAct
Telephone: +44 (0)7739 456292
Email: susan.brownlow@wordsforindustrypr.com