British banks under fire for using flawed net zero study
Some of Britain’s biggest banks are under fire for relying on a flawed net zero study that could have influenced which companies they lend to.
Lloyds, NatWest and HSBC are among the lenders to have used research that exaggerated the impact of climate change on businesses and the global economy.
The revelation comes after the Network for Greening the Financial System (NGFS), which publishes environmental guidance for banks, warned that some of its analysis was based on an inaccurate paper that was recently retracted.
Lloyds, NatWest and HSBC have all confirmed that they used the NGFS research, with some bankers accessing it to scrutinise the sectors most exposed to the net zero transition.
The three banks declined to comment on whether the research was used to influence lending or investment decisions.
However, the Bank of England said last year that banks were increasingly using climate forecasts to determine which businesses they lend money to.
This was partially down to bosses seeking to align with net zero, the Bank added.
A research paper from the United Nations in 2020, drawn up in collaboration with Lloyds and 38 other banks, also said the impacts of climate change should be considered when lending to companies.
Following the controversy, Andrew Griffith, the shadow business secretary, said: “This just highlights the risk of banks straying from their core job of lending into green ‘wokery’ which they barely understand and rely too much on others.
“Whilst too many have been willing participants, we now need a bonfire of the various regulations on climate.”
Details of the flawed study, which originated from a paper by the Potsdam Institute for Climate Impact Research, came to light earlier this month.
The paper predicted that climate change would cost $38tn (£28tn) a year by 2049, while also warning that global economic output risked plunging by 62pc by 2100 if carbon emissions continued to rise unabated.
The NGFS first sounded the alarm over the research this summer, which it used to help produce estimates of the long-term economic risks of climate change.
The paper was then retracted this month, and the NGFS has said it will change the way it assesses the impacts of climate change by the end of next year.
Full story here.
Banks should not be making any decisions on the basis of “aligning with Net Zero”, regardless of which fraudulent climate studies they are using.
They have a duty to put the interests of their depositors first and foremost.
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