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18 March 2022updated 29 Jun 2022 11:08am

Financing the future

Net zero is a growth story where we can all play our part

By James Close

Finance is a key enabler in the drive to net zero and banks such as NatWest Group must play a major role in supporting businesses and individual customers on their journey to a more sustainable future – whether through helping families to purchase energy-efficient homes or supporting businesses and projects that create jobs and speed up the UK’s transition.

It is now two years since NatWest CEO Alison Rose launched our purpose-led strategy, putting climate at its heart. Since then, we have been working hard to turn our ambitions into action.

We understand our responsibility to lead in the fight against climate change. That’s why we’re aiming to deliver £100bn of climate and sustainable funding and financing by the end of 2025. However, we cannot do this alone. As a founding member of the Net Zero Banking Alliance and the Glasgow Financial Alliance for Net Zero (GFANZ) it was inspiring to see global finance joining us and mobilising to tackle climate change at Cop26. As the only banking sponsor of Cop26, NatWest Group is keen to build on this work and ensure the commitments and aspirations outlined in Glasgow become a reality.

While the scale of the transition required to reach net zero is vast, it is also an opportunity for our planet and for our economy. Our Springboard to Sustainable Recovery report, published last year, showed that small to medium-sized enterprises (SMEs) have potentially £160bn of revenue opportunities from the transition to net zero. Some 130,000 jobs and 30,000 new businesses could be created from the transition.

There will be a cost to the change, and that is why we are determined to help our customers, but we can’t lose sight of the fact that there is also a huge opportunity in terms of jobs and revenue. There is also an important role for policymakers to support SMEs on their journey to sustainability. Our calculations show SMEs alone could deliver half of the UK’s ambitious emissions-reduction target. But collectively we need to do more to help SMEs understand and take advantage of the opportunities available to them – illustrated by the fact that fewer than 10 per cent see climate action as a source of future growth.

The York-based Cooper King Distillery has successfully embraced this opportunity. The business was part of NatWest’s Climate Accelerator programme to support and mentor start-ups. In 2021, it launched the first “carbon-negative” gin in England. The company uses renewable energy and plants native to UK woodland to support its climate ambitions. It has seen a 22 per cent rise in its turnover, driven by the support of an engaged press and public looking for businesses who are taking action.

We also know that SMEs can reduce costs by taking action on their emissions, and NatWest is developing tools, financing and support to help them on these journeys. We recently launched a new green loan to incentivise our SME customers to reduce their carbon footprint. This complements steps we have taken to support our climate-conscious retail customers. We introduced a Green Mortgage, offering customers a lower interest rate on mortgages for the most energy-efficient properties, and we collaborated with fintech CoGo to become the first bank in Europe to provide customers with an estimated carbon footprint for their daily spend.

To help realise the opportunity from the transition for our customers, we are putting in place the support mechanisms they need. But we also recognise that we need to lead by example by getting our own house in order. We’ve reduced our own emissions by 46 per cent against a 2019 baseline.

We’ve also completed credible transition plan assessments for oil, gas and coal, which will see us only continue to finance those that have a plan aligned with Paris. To underline our ambition to help bring an end to the most harmful activity, we’ve announced that we will fully phase out of coal in the UK by 2024 and globally by 2030.

Among a number of significant undertakings that NatWest Group has made, we are aiming to achieve net zero by 2050 across our financed emissions, assets under management and our operational value chain. We’ve also said that we will at least halve the climate impact of our financing activity by 2030, against a 2019 baseline. We are also signatories to the Science-Based Targets initiative and recently submitted our sector-specific emissions intensity reduction targets for them to validate – one of the first major banks to do so. Small businesses have a crucial role to play in net zero.

We know that combating climate change must be a collaborative effort – so we are continuing to build powerful partnerships to help accelerate the transition. In association with British Gas, boiler manufacturer Worcester Bosch, and Shelter, the housing charity, we established the Sustainable Homes and Buildings Coalition to improve the energy efficiency of buildings in the UK and to address the key blockers to meeting net zero in the UK built environment. We have also joined forces with other financial firms to launch Carbonplace, a voluntary carbon marketplace. The pilot – a global first – will see NatWest Group and other banks team up to create a thriving and transparent global market-place for carbon offsets, with clear and consistent pricing and standards.

Climate change is the biggest challenge of our time. But as we work together to transition to net zero we should recognise that doing so is not only good for the planet, but can be good for business and our economy as well.

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