Three Global Banks Update Emissions Financing Reduction Targets

Three leading global financial institutions recently announced updated environmentally linked targets aimed at reducing by 2030 their financed emissions in carbon-intensive sectors, including oil and gas.

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Between 23 February and 3 March, three leading global financial institutions announced updated environmentally linked targets aimed at reducing by 2030 their financed emissions in carbon intensive sectors, including oil and gas, cement, iron, steel and aluminum.

The new interim targets announced by Citi include the following reductions: auto manufacturing (31% reduction in emissions intensity); commercial real estate (41% reduction in emissions intensity); energy (29% reduction in absolute emissions); power (63% reduction in emissions intensity); and thermal coal mining (90% absolute emissions reduction).

Deutsche Bank has reported that its financing of oil and gas sector declined by more than 20% in 2022 and thermal coal sector by around 18% and that there were year-over-year reductions in all sectors where the bank had identified an emissions reduction target. Current targets include oil and gas (23% reduction in Scope 3 upstream financed emissions by 2030 and 90% by 2050), power generation (69% reduction in Scope 1 physical emission intensity by 2030 and 100% reduction by 2050), automotive light-duty vehicles (59% reduction in tailpipe emission intensity by 2030 and 100% reduction by 2050), and steel (33% reduction in Scope 1 and 2 physical emission intensity by 2030 and 90% reduction by 2050).

HSBC disclosed updated targets of a 34% reduction in absolute on-balance sheet financed emissions in the oil and gas sector and a 75% reduction in on-balance sheet financed emissions intensity in the power and utilities sectors by 2030. HSBC added that “the choice to adopt an emissions intensity metric for power and utilities reflects the need to reduce global greenhouse-gas emissions from power generation while also meeting growing electricity demand.” Emissions intensity is a metric that sets a target relative to an economic or operational variable. Absolute emissions reduction aims for a set target reduction.

In commenting on the process of reducing emissions financing, the banks emphasized the importance of a transition to a green economy that recognizes the current need for energy from fossil fuels and that issuers themselves are charting unfamiliar terrain in navigating a green transition.

Christian Sewing, CEO of Deutsche Bank commented on the revised targets, saying “In most cases, we can contribute more to reducing greenhouse-gas emissions by working with our clients. But, in cases where we saw no willingness on the part of a client to embark on a credible transition, we would not shy away from exiting a relationship.”

Jane Fraser, CEO of Citi, said the “global economy still runs primarily on oil and natural gas” and that energy security is still an important issue in developing nations where the resources and infrastructure to “make a quick shift to renewables” is limited.

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