Bank transition plans: a roadmap to nowhere
Transition plans are an essential tool to push financial institutions to break free from short-termism and align their activities with a 1.5°C trajectory. Yet, the first transition planning obligations adopted in the European Union are now threatened by the European Commission’s deregulation drive (“Omnibus” proposal). In this context, Reclaim Finance analyzed the disclosures of the 20 biggest European and United Kingdom (UK) banks to understand how far they are in the climate transition planning process.
Key findings:
- None of the banks studied has developed a robust transition plan. In fact, nearly all banks score below 50/100 overall, and the average score is only 41/100. This means even the leading banks analyzed must go much further to reach their climate commitments and be on a credible path to transition.
- Banks’ total scores are pushed up by higher scores in the “Reporting and governance” category (70/100 on average) that rewards the quantity and transparency of disclosures, but cannot be directly linked to meaningful climate action. In fact, banks score the lowest in categories covering the most concrete actions to reduce their negative impact on the climate and to shift their operations, namely, “Decarbonization strategy” and “Engagement strategy”.
- Decarbonization strategies – laying out key actions to reach targets and climate commitments – are especially lacking, with banks providing support to activities at odds with their climate commitments like fossil fuel expansion while struggling to go beyond preliminary risk management.
Reclaim Finance calls on the European Parliament and Member States to preserve transition planning rules and reject the Commission’s Omnibus proposal. On the contrary, the NGO urges policymakers in the EU and beyond to establish clear and ambitious standards defining the minimum content of the plans and ensuring their full implementation. Additionally, it stresses that banks should leverage this analysis and related recommendations to build high-quality transition plans, and supervisors should integrate this dimension into their activities.