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HSBC up, ING down in Jefferies ranking of banks’ environmental risk

Banks criticise methodology of annual report, question fossil fuel financing figures.

HSBC

HSBC has jumped 12 places in Jefferies’ annual scoring of European banks on environmental risks to come fourth, while Société Générale and UniCredit are both down 10 places to last and second-last respectively.

The annual ranking, which assesses 24 European banks on environmental factors including green and fossil financing, transition risk exposure and emissions intensity of loan portfolios, saw Belgium’s KBC take the top spot, followed by Swedbank and DNB.

However, the report was altered after publication to include unspecified changes which promoted Swedbank to the number one position.

HSBC’s rise was attributed by Jefferies to a doubling of green bond financing, coupled with a 33 percent cut in fossil fuel financing. This reduced the group’s fossil financing as a percentage of non-financial corporate credit exposure to just 0.3 percent, well below the cohort average of 2 percent. The report describes this as “a particular achievement” given the bank’s exposure to regions with high levels of manufacturing such as Asia.

Jefferies said that KBC’s original number one position – a jump of 10 places from last year – was due in part to its relatively low exposure to sectors with high transition risk. The Belgian bank was ranked best in class for overall emissions intensity and scores for manufacturing and transport, coming second to Standard Chartered in the energy supply sector.

However, an updated version of the report seen by RI places Swedbank in first. The exact reasons are not specified but the bank took the top spot for green bond financing growth this year, with an almost 125 percent increase.

On the other end of the table, ING fell 13 places to 21. Jefferies claimed the Dutch group increased its fossil fuel financing by 83 percent, while the increase in green bond lending – up roughly $1.7 billion year on year – was lower than the group average of $4.2 billion. Société Générale’s drop to last place was attributed in part by Jefferies again to its lower-than-average increase in green bond lending and to the fact that the group ranked fifth on an absolute scale in terms of fossil financing.

Responsible Investor understands that the research firm had to update the report on Monday afternoon after it incorrectly labelled banks including ING, UniCredit and Swedbank as not being members of the Net-Zero Banking Alliance due to using data from the wrong year. Jefferies did not respond when asked to confirm this.

Spokespersons for a number of banks in the bottom half of the table also disputed the report’s methodology.

A spokesperson for ING noted that Jefferies relied on BankTrack figures for its fossil financing stats. The Dutch bank had “earlier stated that we do not recognise the high figures published by BankTrack”, the spokesperson said, adding that it was aligning its fossil loans with the goals of the Paris Agreement, including ending financing of new oil and gas projects and cutting funding for coal power plants to “close to zero” by the end of 2025.

A senior banker at one of the low-ranking banks said that available data was imperfect, and standards of disclosure and measurement were still evolving. The banker also highlighted the difficulty of sourcing comparable data for each bank, adding that analysts are operating “with one hand behind their back” when trying to make assessments.

A spokesperson for UniCredit said that sustainability was a key pillar of the bank’s business strategy. “Our role is to partner with our clients and support them as they make the necessary adjustments and choices to achieve a fair and just energy transition,” they added. “This is a complex process and one which we are completely committed to. As testament to this within the Jefferies report, UniCredit is highlighted among the top eight banks for green bond issuance, and as having grown green financing at a CAGR of around 50 percent in 2017-21 whilst reducing brown financing. On the latter, our updated coal and oil and gas policies are widely recognised as among best in class”.

A Société Générale spokesperson said the bank did not comment on investor reports.

Find out more about this topic from industry leaders at the RI Europe 2022 conference, taking place in person in London on 14-15 June.