NatWest tops list of banks that are capitalising on net zero opportunities

Global professional services firm, Alvarez & Marsal (“A&M”), has published the findings of the inaugural Green PACE rankings, proprietary research that ranks how the top 25 European and North American banks are capitalising on sustainability as a business opportunity.

The report found that UK banks are outperforming their European and US peers on the transition to net zero, with NatWest coming out at the top of the table, by more than a 10% margin. The outperformance by British banks, and NatWest in particular, can be put down to strong investment and commitment across four capability areas evaluated including green product offering, alignment targets, client orientation and involvement in transition execution.

American banks fared less well, with only 1 US bank in the top 10 (JP Morgan Chase & Co). The weak performance of US banks is due to their lower maturity in ESG practices and commitments.

A&M’s Green PACE ranking is based on an evaluation of the banks’ performance against four attributes which A&M believe will define the winners in sustainability. These are:

• Green Products: A&M looked at whether banks offer a wide range of sustainable finance products including bonds, loans and derivatives for both green and sustainable linked purposes. A&M estimates that the top 25 European and US banks have committed €13tn for sustainable finance as targets by 2030, the figure represents 37% of total bank assets or 15% of global GDP.
• Alignment to net zero: A&M conducted benchmarking of banks net zero target including number of portfolios, asset coverage, data quality and internal tools. A&M found that most banks have committed to phase out coal financing in the EU/OECD by 2030 and worldwide by 2040, with a handful of banks committing to earlier exits. A&M benchmarking also shows that US banks have higher intensity in their oil and gas financed emissions.
• Client orientation and insights: A&M tracked the transition advice and analytics linking client transition operational solutions with financial business case and customised insights.
• Execution of Transition Plans: A&M analysed banks’ involvement in operational execution through climate tech investing, innovate joint ventures and digital platforms.

Fernando de la Mora, managing director, Alvarez & Marsal said: “Global banks have recognised that the transition to net zero does not have to be a thorn in their side and instead is a huge business opportunity. Sustainable bank strategies are evolving from being regulatory and compliance-driven to a broader range of initiatives that can deliver new revenue streams and innovative solutions for clients.

“We are seeing an increasing number of financial institutions placing sustainability at the heart of their business priority. Our Green PACE ranking offers banking leaders a new framework to help them capitalise on ESG as a business opportunity.

Alvarez & Marsal have also published the top five banks for each category. The leading bank in each category are the following:

• Green products: Commerzbank came out top in this section as the bank has set its sustainable finance target at 80% of total assets by 2030, the highest in the industry and has already delivered 65% of its 2025 target.
• Alignment on net zero: ING leads the sector in this area. The bank’s Terra net zero lending portfolio steering approach was pioneering when launched in 2020. It includes detailed targets for nine sectors, climate alignment dashboards, sector outlook, steering actions and client advice opportunities.
• Client orientation and insights: Lloyds Bank is the industry leader in this area having deployed more than six client transition analytics tools to assist multiple client segments with their customised transition plans.
• Execution of client transition: Crédit Agricole came out on top in this section thanks to its investment in ESG marketplaces. The bank has created platforms for homeowners, SMEs and farmers to help them sustainably renovate, transition to net zero and develop carbon capture techniques respectively.