NatWest pledges £100bn of Climate and Sustainable Funding and Financing
A report published today by NatWest sets out the potential opportunity that exists for the UK economy from the transition to net-zero, finding that SMEs could create up to 130,000 new jobs, produce around 30,000 new businesses and result in an estimated £160 billion opportunity for the UK economy. The report finds that there is a significant opportunity for the UK to be a global leader in the transition to net-zero.
The report also found that the UK’s 6 million Small to Medium Enterprises (SMEs) can achieve 50% of the UK’s Net Zero decarbonisation goals, if they receive the right support through funding, knowledge, and training.
NatWest has announced a series of initiatives, leading with a target to provide £100 billion of Climate and Sustainable Funding and Financing (CSFF) by the end of 2025. Part of this new CSFF target will help to support the investment needed to transition the UK to a net zero economy and will help to support the bank’s customers including SMEs on their transition to a net zero and a more sustainable economy*.
This marks an acceleration in NatWest’s ambition to support UK decarbonisation and the Government’s Net Zero Strategy, in-line with the 10-point plan for a Green Industrial Revolution. The report and its associated initiatives are intended to support the efforts to halve the bank’s financed emissions by 2030 and meet the net zero targets by 2050, in line with its commitments as a founding member of the Net Zero Banking Alliance.
While the report’s finding that less than 10% of SMEs currently see climate action as a source of future growth, it found that SMEs have two distinct opportunities to create value from delivering climate action: driving business value by reducing their own emissions and unlocking growth through wider climate action. With the right support, the vast majority of SMEs could benefit financially from reducing their carbon footprint, and through supporting the UK’s transition by delivering activity like residential retrofitting, installing renewable power equipment, upgrades to the electricity grid and installing electric vehicle charge points.
The report calls on financial institutions, government, industry bodies and large corporates to play their role in collectively supporting SMEs to unlock the climate opportunity.
NatWest also plans to launch a new green loan product for SME customers, new specialist Accelerators for Clean Transport and Circular Economy, new tools for businesses to monitor their carbon footprint, and mandatory climate training for all its relationship managers in collaboration with University of Cambridge and University of Edinburgh.
The report makes six clear recommendations where SMEs need most support to achieve effective transition:
- Funding Access – financing that reflects the societal benefit of delivering climate action and ensures that business initiatives and investments make financial sense.
- Awareness – support to recognise the opportunity from climate action, highlighting key skills required to transition successfully.
- Knowledge – help to reduce their impact and improve their ability to measure and report their impact.
- Skills and capabilities – support to develop new skills to deliver transition, such as training employees, achieving accreditations and certification, and management capabilities.
- Market access – improved financial certainty of the benefits of broader climate action.
- Navigation – support to navigate the complex and evolving landscape, understanding what support is available and what will most benefit their business.
Alison Rose, Chief Executive, NatWest Group said:
“According to the Springboard to Sustainable Recovery report published today, SMEs play a critical role in the UK economy, contributing around 50% of total UK turnover and around 60% of employment. We have identified the potential opportunities as being worth £160bn for SMEs and the UK economy, and we want to do everything possible to support our customers in achieving a share of that prize. This report is the response to what our business customers are telling us they need in terms of practical support as they face a complex decision-making process.
“We are with them on every step of the journey that takes them from awareness and understanding, to ability to act, and finally to achieving positive climate and financial impact. Our ambition to play a leading role in the UK’s transition to a net zero economy is why we are targeting £100 billion of Climate and Sustainable Funding and Financing by the end of 2025.
“I’m firmly of the view that we should never underestimate the power of the small – and in this instance SMEs – for leveraging big advances. What this report tells us, in clear numbers, is that all sectors of the economy will need to play their part in helping the UK achieve its climate ambitions. We must look at this not just as an imperative, but as an opportunity for businesses.”
Lord Nicholas Stern, Chairman of the Grantham Research Institute on Climate Change and Environment, said:
“In the fifteen years since we published The Stern Review, governments and businesses have been slow to recognise the enormous and growing threat that climate change poses to economic development. This report by NatWest is timely and important, and makes it clear that the UK’s small, start up and innovative firms need support to capitalise on the emerging opportunities from the transition to a low-carbon economy.
“Fifteen years from now, we will know whether we will succeed or fail to meet the UK’s net-zero target, and the UK’s SMEs will play a defining role in the outcome.”
The report is the second in NatWest’s ‘Springboard’ series of reports, following March’s ‘Springboard to Recovery’ report into SME recovery, post-pandemic. The report was created in consultation with partners including McKinsey, Microsoft, British Chambers of Commerce, Federation of Small Businesses, CBI, Blackrock, CoGo, HVM Catapult, ScaleUp Institute and National Farmers Union (NFU).
- * NatWest Group will target to provide £100 billion of climate and sustainable funding and financing from 1 July 2021-25 across the UK and Europe. For further information on the CSFF please see notes to editors below and https://natwestbusinesshub.com/
Notes to Editors
- Based on the Inframation Deals League Table**, NatWest Group has been externally recognised as a leading lender to the UK renewables sector by number of transactions over the past 10 years. In 2020, NatWest Group was ranked 1st in UK project finance renewables lending.
- NatWest Group will provide £100 billion of Climate and Sustainable Funding and Financing by the end of 2025 (effective from 1 July 2021). Part of this will support the investment needed to transition to a net zero economy and may include funding the transition from fossil fuel-based energy generation to renewables, including funding energy storage plants, and improving the energy efficiency of homes and buildings.
- The new £100 billion Climate and Sustainable Funding and Financing will build on opportunities across key sectors. These may include:
- Backing renewables and wind – NatWest Group has been externally recognised as a leading lender to the UK renewables sector by number of transactions over the past 10 years.
- Homes and public buildings – our Green Mortgage product was launched in October 2020 and offers lower interest rates for customers purchasing homes with an EPC rating of A or B, rewarding them for playing their part in helping to drive the UK transition to a low carbon economy.
- Electric Vehicles – NatWest will continue working with our partners to facilitate electric vehicle transition and transportation decarbonisation by easing investment in infrastructure.
- In H1 2021, NatWest met its 2020-2021 target of providing £20 billion of climate and sustainable funding and financing under the previous criteria six months early.
- To provide market transparency, we publish our Climate and Sustainable Finance Inclusion Criteria (CSFI) on our website (the previous CSFI Criteria can also be found in the “Downloads page” under Climate and Sustainable Finance) that we use to determine the assets, activities and companies that are eligible to be counted towards this target.
- We periodically update the CSFI Criteria to reflect industry and market developments in climate and sustainable funding and financing. The latest version of the CSFI Criteria (Version 1.3) are the relevant criteria for the £100 billion climate and sustainable funding and financing target from 1st July 2021 only. The main changes and expansions to the previous CSFI Criteria are:
- Revisions to the Built Environment category to align to the Bank’s Green, Social and Sustainability Bond Framework and reflect the launch of green purchase and re-mortgage products.
- Removal of ‘Nuclear’ and ‘Energy from Waste’ in the Low Carbon and Offsetting technology category to align to the Green Gilt Framework.
- Inclusion of sustainability bonds, as well as sustainable linked bonds and loans.
- To supplement the existing general lending category, which allows any general purpose lending or wider financing to customers who can evidence (to NatWest Group’s satisfaction through review of the issuer’s or borrower’s most recently published external results) that 50% or more of their revenues are from the categories and sectors outlined in the CSFI Criteria the following additional categories / specifications have been added
- in case of Utilities or Real Estate customers in case 75% or more of their assets are in the categories and sectors outline in the CSFI Criteria; and
- in case of a fund client – if 75% of Assets under Management are invested in activities outlined in the CSFI Criteria, at the time of reporting.
** Source: Inframation Deals League Table
Caution about climate and sustainable funding and financing (CSFF) information.
Climate and sustainable funding and financing activities and their classification and reporting are still not subject to a single recognised or accepted, consistent and comparable set of definitions or standards in the UK or globally. There is little certainty that such activities and or reporting of those activities will meet any present or future expectations or requirements for describing or classifying funding and financing activities as “green” or “sustainable” or having similar labels (including existing or proposed standards, such as the EU Taxonomy, EU SFDR and EU GBS). We expect policies, regulatory requirements, standards, and definitions to be developed and evolve over time.
Preparation of some of the information in the research report referred to in this announcement as well as reporting on CSFF activities against the £100 billion CSFF target requires the application of a number of key judgements, assumptions and estimates. The reported measures on such activities reflect estimates, assumptions and judgements at the given point in time. There is a risk that these judgements, estimates or assumptions may subsequently prove to be incorrect. In addition, the maturity of underlying data, systems and controls that support such reporting is generally considerably less sophisticated than the systems and internal controls for financial reporting and it also includes manual processes.
This document and any information contained or otherwise accessible through natwestgroup.com are historical and only speak as of their respective dates. Reference to natwestgroup.com and other websites are made for information purposes only. Information found at such websites are not incorporated by reference into this document. NatWest Group is under no obligation to update these materials, absent a legal duty to do so.
Caution about Springboard to Sustainable Recovery.
The key findings, estimates and projections in this announcement are based on various industry and other information and are based on assumptions and estimates and the result of market research, and are not statements of historical fact.
No securities offering. The information, statements and opinions contained in this announcement do not constitute a public offer under any applicable legislation, an offer to sell or solicitation of any offer to buy any securities or financial instruments, or any advice or recommendation with respect to such securities or other financial instruments.
Forward-looking statements. The £100 billion CSSF target, key findings, estimates and projections referred to in this announcement (including projections about estimated UK’s carbon reduction delivered by SMEs, the estimated number of jobs created and SMEs by the transition to net-zero, the value of the potential opportunities for the SMEs) are forward-looking statements. Words or phrases such as ‘estimate’, ‘believe’, ‘commits’, ’continue’, ‘could’, ‘expect’, ‘forecast’, ‘goal’, ‘guidance’, ‘intend’, ‘may’, ‘objective’, ‘plan’, ‘potential’, ‘predict’, ‘projection’, ‘seek’, ‘should’, ‘target’, ‘will’, ‘will provide’, ‘would’ or similar expressions that convey the prospective nature of events or outcomes generally indicate other forward-looking statements. These forward-looking statements are based on current plans, expectations, estimates, targets and projections, and are subject to significant inherent risks, uncertainties and other factors, both external and relating to NatWest Group’s strategy or operations, which may result in NatWest Group being unable to achieve the current plans, expectations, estimates, targets, projections and other anticipated outcomes expressed or implied by such forward-looking statements. The key findings, estimates and projections in this announcement are based on various industry and other information and are based on assumptions and estimates and are the result of research, not statements of historical fact. By their nature, certain of these disclosures are only estimates and, as a result, actual future results could differ materially from those that have been estimated. Accordingly, undue reliance should not be placed on these statements. The forward-looking statements contained in this document speak only as of the date we make them. Except to the extent legally required, we expressly disclaim any obligation or undertaking to update or revise any forward-looking statements in this document, whether to reflect any change in our expectations regarding those forward-looking statements, any change in events, conditions or circumstances on which any such statement is based, or otherwise.
This cautionary note and forward-looking statement should not be regarded as complete and comprehensive and should be read together with:
- the ‘Risk Factors’ included on pages 345 to 362 of the NatWest Group plc 2020 Annual Report and Accounts (with special regard to the risk factors in relation to ‘Climate and sustainability related risks’ that describes several particular uncertainties, climate and sustainability related risks to which NatWest Group is exposed) and included on page 113 of NatWest Group’s H1 2021 Interim Results;
- the ‘Cautionary statement regarding forward-looking statements’ on page 367 of the NatWest Group plc 2020 Annual Report and Accounts and on page 115 of NatWest Group ‘s H1 2021 Interim Results;
- Section 5.7 (Caution about climate metrics) and the ‘Climate-related and other forward-looking statements and metrics’ (page 65) of the NatWest Group’s Climate-related disclosure report 2020; and
- the cautionary statement of NatWest Group’s Climate, Purpose and ESG measures supplement H1 2021.