Net zero activity update

Net zero activity update

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Supporting the transition to a low carbon economy aligns with our purpose to Help Britain Prosper. Our focus on the transition is core to our strategy as this is an area where we can make a real difference, whilst also creating opportunities for future growth. We recognise the importance of transitioning to net zero by 2050 or sooner and our role in helping to enable and drive that transition in the real economy. As the bank of choice for millions of consumers and businesses across the UK, our commitment to financing the transition to a low-carbon economy seeks to support the significant transformation required across the economy to reach net zero.

Our net zero ambitions and sector targets

We are committed to achieving net zero across the activities we finance by 2050 or sooner. In our banking activity, we have an ambition to work with customers, government and the market to help reduce the emissions we finance by more than 50 per cent by 2030. Through Scottish Widows, we have an ambition to halve the carbon footprint of our investments by 2030. Furthermore, we are aiming for net zero in our own operations by 2030 and have developed a new net zero ambition for our supply chain that we detail further in this update.

In April 2021, we became a founding member of the Net Zero Banking Alliance (NZBA) and committed to develop sector-based 2030 emissions reduction targets for our most carbon intensive sectors that will build on our banking related climate ambitions. Our first round of targets, detailed in this document, is focused on fossil fuel sectors and other sectors where we have high emissions and/or material financial exposure and readily available data. The seven targets that we have now developed cover some of the UK’s hardest to abate and most material sectors including residential buildings, transportation, power and oil and gas. 

All of our targets are science-aligned, using either UK (Committee on Climate Change) or global (International Energy Agency) scenarios, with no current plan to use offsets to achieve our sector targets.   Six of our seven targets use scenarios that limit global warming to 1.5°C by the end of the century and have limited overshoot or reliance on negative emissions technologies.  Aviation is our only target that uses a pathway aligned to well below 2°C, where the near-term challenges in decarbonising the sector indicate achieving an aviation portfolio 1.5°C target by 2030 is unlikely.  

In setting our targets, we have determined the key actions we will take to work towards achieving them based on the levers available today and expected future changes in the market.   Each of the sector targets has some degree of stretch to ensure we remain ambitious and initial views from the sectors where we have now set targets suggests we may need to go further in some areas to achieve our overarching 50 per cent emission reduction ambition.   We expect our view to evolve as we set additional targets and where a gap remains we will review whether we can take mitigating steps.

Working with others

We welcome our responsibility to help the UK transition to a net zero future but recognise that although we can achieve much through our own lending, we cannot do this alone.  Each sector presents its own set of challenges and will have different trajectories of transition and our ability to meet sector targets will also depend on a number of external factors. Transitioning to net zero is a joint effort and will depend on appropriate government policies and incentives being implemented, industry collaboration and significant technological advancements.

These targets will set the direction of travel for our activity in specific sectors over the next decade, and will be followed by further sector transition plans in our first Climate Transition Plan, which will form part of our Sustainability Report due in February 2023. Our Climate Transition Plan will highlight the progress against ambitions and actions we will take towards transition, including how we will engage with others to help create the right conditions to enable us to meet our targets. We are committed to working with our customers and clients to support their transition while we also address the emissions from our own operations and supply chain; we have set out below a new net zero ambition for our supply chain.  

As we set out our vision for these important sectors, it is clear that we need to find the right balance of industry collaboration, government policy (UK and global) and financial support to achieve a Just Transition of the UK economy towards net zero by 2050. There are known dependencies that will influence the ultimate achievement of the targets and we are committed to working in partnership with our customers and other stakeholders towards that goal in the months and years ahead.