Alison Rose, Chief Executive Officer of NatWest Group, said: “I am delighted that NatWest Group has become the first UK bank, and one of the largest banks globally to date, to have science-based targets validated by the SBTi.
This validation is an important step in our journey to implement our purpose-led strategy and ambition to be a leading bank in the UK helping to address the climate challenge.
These targets which underpin our first climate transition plan (due for publication in February 2023), support our ambition to at least halve the climate impact of our financing activity by 2030 and become net zero by 2050, and have been assessed by SBTi against the latest available climate science.”
NatWest Group validated science-based targets:
The targets set out below must be read in conjunction with the “Important Caution About NatWest’s SBTi Targets” included in this announcement.
Own operational footprint
Scope 1 and 2: NatWest Group is targeting to reduce absolute scope 1 and 2 GHG emissions by 50% by 2030 from a 2019 base year.
NatWest Group is targeting to increase annual sourcing of renewable electricity from 69% in 2019 to 100% by 2025.
Scope 3 category 1-14 (1): NatWest Group is targeting to reduce absolute scope 3 GHG emissions from categories 1-14 by 50% by 2030 from a 2019 base year.
Financing activity
Scope 3 Portfolio Targets (2)
Headline target: NatWest Group’s portfolio targets cover 79% of its lending activities by outstanding exposure as at 31 December 2019(3).
Scope 3 asset class level targets
Asset class
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Method (4)
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Target
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Lending activities
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Residential mortgages
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Sectoral Decarbonisation Approach
(SDA) (5)
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NatWest Group is targeting to reduce GHG emissions from its Residential mortgage portfolio by 49% per square metre by 2030 from a 2019 base year.
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Corporate loan: Commercial real estate
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SDA
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NatWest Group is targeting to reduce GHG emissions from the Commercial real estate sector within its corporate loan portfolio by 60% per square metre by 2030 from a 2019 base year.
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Electricity generation project finance
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SDA
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NatWest Group is targeting to reduce GHG emissions from its Electricity generation project finance portfolio by 76% per megawatt hour by 2030 from a 2019 base year.
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Corporate loan: Electricity generation
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SDA
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NatWest Group is targeting to reduce GHG emissions from the Electricity generation sector within its corporate loan portfolio by 76% per megawatt hour by 2030 from a 2019 base year.
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Corporate loan: Land transport
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SDA
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NatWest Group is targeting to reduce GHG emissions from
● Freight road transport sector by 19% per tonne-kilometre;
● Passenger rail transport sector by 42% per passenger- kilometre;
● Passenger road transport sector by 31% per passenger- kilometre.
within its corporate loan portfolio by 2030 from a 2019 base year
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Corporate loan: Automotive manufacturing
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SDA
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NatWest Group is targeting to reduce GHG emissions from the Automotive manufacturing sector within its corporate loan portfolio by 24% per vehicle- kilometre by 2030 from a 2019 base year.
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Corporate loan: Cement
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SDA
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NatWest Group is targeting to reduce GHG emissions from the Cement sector within its corporate loan portfolio by 67% per tonne by 2030 from a 2019 base year.
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Corporate loan: Aluminium
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SDA
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NatWest Group is targeting to reduce GHG emissions from the Aluminium sector within its corporate loan portfolio by 28% per tonne by 2030 from a 2019 base year.
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Corporate loan: Iron and steel
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SDA
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NatWest Group is targeting to reduce GHG emissions from the Iron and steel sector within its corporate loan portfolio by 50% per tonne by 2030 from a 2019 base year.
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Corporate loan: Oil and gas sector (6)
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Temperature Rating (7)
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NatWest Group is targeting to align its scope 1 + 2 portfolio temperature score by loan value from the Oil and gas sector within its corporate loan portfolio from 3.2°C in 2019 to 2.3°C by 2030.
NatWest Group is targeting to align its scope 1 + 2 + 3 portfolio temperature score by loan value from the Oil and gas sector within its corporate loan portfolio from 3.2°C in 2019 to 2.3°C by 2030.
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Corporate loan: Other sectors including Aviation, Shipping and Agriculture primary farming (6)
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Temperature Rating
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NatWest Group is targeting to align its scope 1 + 2 portfolio temperature score by loan value from the corporate loan Other sectors portfolio from 3.2°C in 2019 to 2.3°C by 2030
NatWest Group is targeting to align its scope 1 + 2 + 3 portfolio temperature score by loan value from the corporate loan Other sectors portfolio from 3.2°C in 2019 to 2.3°C by 2030.
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Investment activities
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Listed equity, Corporate bonds, Private equity (3)
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Temperature Rating
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NatWest Group is targeting to align its scope 1 + 2 portfolio temperature score by invested value within its Listed equity, Corporate bonds and Private equity portfolio from 3.2°C in 2019 to 2.3°C by 2030.
NatWest Group is targeting to align its scope 1 + 2 + 3 portfolio temperature score by invested value within its Listed equity, Corporate bonds and Private equity portfolio from 3.2°C in 2019 to 2.3°C by 2030.
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Notes:
(1) Refer to page 67 of the NatWest Group plc 2021 Climate-related Disclosures Report: 2021-climate-related-disclosure-report.pdf (natwestgroup.com) for details on our own operational footprint reporting boundary and scope.
(2) Financing activity scope 3 targets relate to loans and investments (debt securities and equity shares) on NatWest Group’s balance sheet.
(3) Lending activities comprise: Loans to banks and customers-amortised cost, gross of expected credit losses. Exclusions from scope of analysis primarily comprise personal credit cards and unsecured lending, short term lending (including invoice financing) and reverse repurchase agreements. Refer to section 5.7 of the NatWest Group plc 2021 Climate-related Disclosures Report for linkage to NatWest Group 2019 balance sheet for sectors analysed.
Investment activities include debt securities and equity shares – amortised cost and fair value through other comprehensive income. Investment activities targets cover 57% of the portfolio as at 31 December 2019, excluding government debt securities.
On a total exposure basis (including cash and balances at central banks, loans to banks and customers, trading assets, derivatives and other financial assets), these targets cover 39% of the outstanding exposure as at 31 December 2019. SBTi target setting methodologies currently focus primarily on lending and investment activities. As new methodologies and data become available, SBTi are expected to release additional guidance to increase asset class and activity coverage.
(4) Refer to page 75 of the NatWest Group plc 2021 Climate-related Disclosures Report for details of scenarios used for assessing 2030 emissions and emissions intensity by sector. In addition, pages 78-89 include methodologies used as well as assumptions underlying the scenarios.
(5) SBTi’s Sectoral Decarbonisation Approach (SDA) is a scientifically informed method for companies to set GHG reduction targets necessary to stay within a 2°C temperature rise above preindustrial levels.
(6) Refer to page 80 of the NatWest Group plc 2021 Climate-related Disclosures Report for 2019 and 2030 emission intensities for Oil and Gas, and Agriculture (primary farming) sectors. These sectors have been included within the temperature alignment methodology in the above table as SBTi SDA methodologies for these sectors are still under development. The estimated reduction in emissions for the oil and gas sector per terajoule is 38% by 2030 against a base year of 2019 and for the agriculture (primary farming) sector per GBP million of revenue is 26% by 2030 against a base year of 2019.
(7) To assess temperature rating targets, we have used SBTi Temperature Rating methodology Where available, we used GHG emissions reduction targets disclosed by customers through CDP to calculate temperature scores for each customer. Customers who didn’t have externally disclosed targets through CDP were assigned a default score of 3.2°C. Customer temperature scores were aggregated to calculate NatWest Group temperature rating by using the weighted average temperature score (WATS) methodology, which weights counterparty targets based on their proportion in a portfolio. Other aggregation approaches, including portfolio owned emissions approaches, were also considered, but WATS was found to yield the most coverage of companies with targets.
Temperature rating included in the table reflects potential warming in 2100 above pre-industrial levels based on current emissions targets set by customers within the sectors covered by the assessment. Targets set by customers are expected to become more ambitious, aligned with expected regulatory developments including disclosure requirements. This will reduce the use of default score of 3.2°C, currently allocated to customers, replaced by actual temperature ratings linked to their targets. As a result, NatWest Group portfolio temperature rating is expected to decrease over time, eventually converging to 1.5°C. Further analysis of the SBTi temperature rating methodology is available within: Measuring Portfolio Alignment report.
Important Caution About NatWest Group’s SBTi Targets
The targets disclosed above must be read together with the accompanying notes and the caution about each target related assumptions, data quality and other uncertainties included in the NatWest Group plc 2021 Climate-related Disclosures Report sections 5.6, 5.7 and 5.8. Please refer to the NatWest Group plc 2021 Annual Report and Accounts for additional information on interpreting forward-looking statements. The risk factors associated with achieving these targets are further described in “Climate and sustainability-related risks” on page 416 – 421 of the NatWest Group plc 2021 Annual Report and Accounts and on page 107 of the NatWest Group – Interim Results 2022. Please also refer to “Forward Looking Statements” on page 433 of the NatWest Group plc 2021 Annual Report and Accounts.
SBTi is a voluntary paid service which has independently validated the above NatWest Group’s 2030 physical emission intensity targets as science-based targets set in line with the validation criteria and recommendations of the SBTi Financial Sector Science-based Targets Guidance (August 2022) (the “SBTi FI Guidance”).
The SBTi FI Guidance is not a regulatory accounting, audit or reporting standard and remains subject to ongoing discussion, research and amendment including regarding the SBTi target design, implementation strategies, policy linkages and quantification of emission impacts (see further, Chapter 9 of the SBTi FI Guidance).
These targets constitute forward-looking statements and are based on current expectations, estimates, assumptions, 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.
NatWest Group believes that these targets are ambitious and are not guarantees, pledges or commitments that these targets will be met as there is a significant risk that some or all these targets may not be met, including as a result of the risk factors described in “Climate and sustainability-related risks” on page 416 – 421 of the NatWest Group plc 2021 Annual Report and Accounts. Please also refer to “Forward Looking Statements” on page 433 of the NatWest Group plc 2021 Annual Report and Account.
These targets have been set based on a number of external methodologies, scenarios (in particular the scenarios published by The International Energy Agency and the UK Committee on Climate Change), pathways and assumptions and extrapolations that vary by sector and are chosen by management exercising judgement. For a summary of these, please refer to the NatWest Group plc 2021 Climate-related Disclosures Report in particular the following sections on pages 73 – 93:
- Context of Paris alignment at NatWest Group;
- Methodologies, standards and standard setters;
- Scenario selection;
- Linkage to NatWest Group balance sheet;
- Estimation of financed emissions;
- Data quality score;
- NatWest Group approach to estimating financed emissions;
- Estimation of emission intensity;
- Estimates of financed emissions and emission intensities;
- Overview of data limitations;
- Cautionary note about climate-related data and methodology challenges (Section 5.8);
- Climate-related and other forward-looking statements and metrics (Section 5.9); and
- Estimates of financed emissions of lending and investment by sector, including approaches used to estimate financed emissions, emission intensities as well as estimated convergence points and the assumptions related to the scenarios used and on-going policy horizon to support some of these assumptions.
In general, the quality of the data relied upon in climate-related planning and reporting is often not yet of the same standard as more traditional financial reporting and climate-related reporting in our industry is not yet subject to the same globally accepted accounting principles and rules as traditional financial planning and reporting.
The targets, information, statements and opinions contained in this document 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 instrument.
