Sustainability
Climate and environment
Our approach to climate change
. . .

Our approach to climate change

Climate related disclosures report 2022 cover

We have an ambition to be net zero across our financed emissions, assets under management and our operational value chain by 2050, aligned with the UK’s legal commitment to be net zero by 2050. We continue to engage with and support our customers’ transition to a net-zero economy and monitor further developments, including progress on supplier and fund decarbonisation.

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Our climate strategy

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^{(1) NatWest Group’s ability to achieve its strategy, including its climate ambitions and targets entails significant risks and will significantly depend on many factors and uncertainties beyond NatWest Group’s control. The most important of these uncertainties and factors, which could cause actual results and outcomes to differ materially from those expressed or implied in forward-looking statements, are summarised in the Risk factors included on pages 417 to 422 of the NatWest Group plc 2023 Annual Report and Accounts (PDF 20MB) (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 which may be amended from time to time). For more information, refer to section 7 of our 2023 Climate-related Disclosures Report (PDF 10MB) (Cautionary statements).}

^{(2) Our net zero by 2050 AUM ambition encompasses total AUM, including Managed Assets, Bespoke and Advisory, refer to page 76 of our 2023 Climate-related Disclosures Report (PDF 10MB) for details. We consider Managed Assets (those assets we invest on our customers’ behalf, which represented 84% of AUM as at 31 December 2023) to be in scope for our interim 2030 portfolio alignment target and weighted average carbon intensity (WACI) ambition. For details, refer to pages 38 to 39 of the Net Zero Asset Managers Initiative’s Initial Target Disclosure Report (May 2022).}

^{(3) Our operational value chain captures greenhouse gas emissions Scopes 1, 2 and 3 (Categories 1-14, excluding Categories 8, 10, 14). Scope 3 category 15 (financed emissions) is discussed in section 5.2 and 5.3 of our 2023 Climate-related Disclosures Report (PDF 10MB).}

^{(4) Data challenges, particularly the lack of granular customer information, create challenges in identifying customers with ‘coal related infrastructure’ (e.g. transportation and storage) and other customers with coal-related operations within NatWest Group’s large and diversified customer portfolios.}

^{(5) Enterprise-wide risk management framework.}

^{(6) Direct own operations is defined as Scope 1, Scope 2 and Scope 3 (paper, water, waste, business travel, commuting and work from home) emissions. It therefore excludes upstream and downstream emissions from our value chain}

Climate Progress highlights

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^{(1) Between 1 July 2021 and the end of 2025.}

^{(2) Based on 2022 emissions, reflecting sectors included within our Climate transition plan - see section 2.3 of our 2023 Climate-related Disclosures Report (PDF 10MB) for further detail.}

^{(3) Loans and investments relate to On-balance sheet gross lending and investment exposure, accounted at amortised cost (including finance leases) and FVOCI.}

^{(4) Our Credible Transition Plan (CTP) assessment undertaken in 2021, which is monitored annually, employed a top-down approach to identify existing coal-related customers, utilising the expertise of our frontline teams. However, we recognise that this was a point-in-time assessment. During 2024, we are working to review our ESE policies. We have also set up a working group within the Commercial & Institutional business segment to support development of guiding principles for assessment of thermal and lignite coal embedded within activities like transportation, storage, supply chain and value add services, additionally ensuring due consideration is given to external factors such as energy security.}

^{(5) We consider Managed Assets (those assets we invest on our customers’ behalf, which represented 84% of AuM as at 31 December 2023) to be in-scope for our interim 2030 portfolio alignment target and our weighted average carbon intensity (WACI) ambition.}

^{(6) Against a 2019 baseline. Scope 3 emissions relating to our operational value chain only. For further detail see sections 2.7 and 5.1 of our 2023 Climate-related Disclosures Report (PDF 10MB). Scope 3 Category 15 financed emission is covered in section 5.2 and 5.3 of our 2023 Climate-related Disclosures Report (PDF 10MB).}

^{(7) Retail Banking RBS, NatWest and Ulster Bank Northern Ireland mobile apps.}

^{(*) Within scope of EY assurance – see the External Assurance webpage for further details.}

How we are helping to address the climate challenge

We continue to support our customers transition by offering products and services as well as engagement and education tools like Carbon Planner and our Home Energy Hub.

We are working to support our customers’ transition to net zero across a range of sectors and have now provided a cumulative total of £61.9 billion climate and sustainable funding and financing against our target to provide £100 billion between 1 July 2021 and the end of 2025.

In November, we launched our Home Energy Hub as an expansion to our existing Home Energy Plan product. The online portal provides homeowners with a single site to learn about potential home energy efficiency benefits, access to trusted tradespeople to deliver upgrades and finance options including available grant funding. The tool is available to both our existing 1.3 million mortgage customers and non-NatWest Group customers.

We also completed our Greener Homes Retrofit Pilot with the Sustainable Homes and Buildings Coalition where we took customers through a fully funded end-to end home retrofit. This pilot showed that retrofitting homes, at scale, could be both an achievable and affordable goal with the right conditions. It also provided valuable insights and helped us understand the challenges our customers face at various stages of their retrofit journey. Collaboration has also remained central to our efforts. We launched a new strategic partnership with the World Wildlife Fund (WWF-UK) to help support a sustainable transition for the UK’s food and agricultural sectors. We also partnered with the Supply Chain Sustainability School to provide a free retrofit learning platform for the UK’s construction industry, helping to share knowledge and develop the skills needed to retrofit homes and buildings across the UK.

On 9 February 2023, we announced that with immediate affect we will no longer provide reserve based lending specifically for the purpose of financing oil and gas exploration, extraction and production for new customers, and, after 31 December 2025 we will not renew, refinance or extend existing reserve based lending specifically for the purpose of financing oil and gas exploration, extraction and production.

During 2023, we have continued to enhance our measurement capabilities and scope of financed emissions models. In addition to sector-level lending models, where measurement standards are more developed, we have estimated emissions for some lending and investment exposures on a collective basis. As a result, we have now analysed 90% of our loans and investment exposure at 31 December 2022 (74% at 31 December 2019) comprising 80% modelled at a sector level and 20% modelled on a collective basis.

We also focussed on activities with the potential to contribute towards our ambition to reduce our direct own operations by 50% by 2025, against a 2019 baseline, as well as making progress against our SBTi validated 2030 targets. We achieved a 54% reduction against a 2019 baseline in our Scope 1 and Scope 2 location-based emissions and will continue to pursue further decarbonisation towards our 2050 net-zero ambition as we implement and refine our Climate transition plan.

We continued to align our financial planning process with the climate transition planning process. This included adding climate policy and technology-related transition assumptions into the base case macroeconomic scenario used for financial planning and the assessment of Expected Credit Loss (ECL). We continued to integrate climate-related risks and opportunities into our asset management investment strategy and assess potential impacts from the transition towards net zero.

As we implement our Climate transition plan, we will continue to refine and prioritise our climate-related opportunities based on their relative commercial and decarbonisation potential and support our customers and the wider economy transition to net zero.

Tackling climate change is both a significant opportunity and challenge. While we have made some progress since setting out our climate strategy in 2020, we recognise the scale of the task ahead. To achieve our ambitions, we require timely and appropriate government policy and technological innovation to incentivise changes in consumer behaviour. We will continue to work with commercial and policy partners and develop effective interventions to play our part in supporting the UK’s transition to a net-zero future.

Our systems thinking approach

We recognise that the decarbonisation of certain sectors can have a large impact on decarbonisation within other sectors, the most prominent being energy. Also, opportunities within one sector may be dependent on other sectors, for example, within property-related sectors there is a dependency on low-carbon building materials, efficient building practices and adequate supply chains to support the decarbonisation of residential mortgages and commercial real estate. A systems thinking approach considers how carbon flows between sectors in the economy, and factors that determine the magnitude of those carbon flows. These factors can include government policy, carbon intensity of materials, technologies and infrastructure, configurations of existing value chains and consumer preferences and behaviours.

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Refer to section 2.4 of our 2023 Climate-related Disclosures Report (PDF 10MB) for further detail

Climate transition plan

In 2023, we continued to implement and refine our Climate transition plan. We focused on delivery of our 2030 decarbonisation ambitions by supporting customer transition to net zero, helping to end the most harmful activities, building powerful partnerships and collaborations, and getting our own house in order. These initiatives provided us with a greater understanding of the dependencies NatWest Group and our customers have on timely and appropriate government policy and technological developments that will support customer transition.

Our strategic approach to climate change

As a primarily UK-focused bank, we have considered the majority of climate-related risks and opportunities influencing our strategy through a UK lens. Exceptions are included as part of this report, for example AUM, which are invested globally (refer to section 6 of our 2023 Climate-Related Disclosures Report).

The physical and transition risks associated with climate change are transmitted through the economy to NatWest Group. This transmission, which also includes liability risks, happens in a number of ways, including, but not limited to, impacts on NatWest Group’s key risks. See sections 3.2 and 6.4 of our 2023 Climate-Related Disclosures Report for further details of identified and potential climate-related risks.

Climate-related opportunities include finding ways to support our customers in their transition journey, whether through the provision of funding and financing or through products and services to support their transition. Refer to pages 15 and 16 of our 2023 Climate-Related Disclosures Report for further details.

Climate Transition Plan – Scope and approach

Our Climate transition plan focuses on the delivery of our 2030 decarbonisation ambitions, supporting further work on our journey to net zero by 2050 across our financed emissions, AUM and our operational value chain. Due to the materiality of emissions associated with our financing activity, this section primarily focuses on our financed emissions transition plan including actions to achieve our 2030 ambition to at least halve the climate impact of our financing activity and our sector based SBTi validated targets.

NatWest Group Climate transition plan comprises analysis of:

Products, services and business model see section 2.4 of our 2023 Climate-Related Disclosures Report for further details - Supporting our customers’ transition remains a key driver in the ongoing development and delivery of our transition plans. Business teams within each sector have worked to identify products, services and business model changes to support customer transition. Where possible, this analysis has been performed at a subsector level to ensure actions most relevant to customers within these segments are identified within the transition plan.
Financial planning see section 2.5 of our 2023 Climate-Related Disclosures Report for further details - During 2023, we focused on enhancing the linkage between our Climate transition plan and the financial plan and we will continue to develop this alignment during 2024 as part of the evolution of our Climate transition plan.
Sensitivity analysis including dependence on government policies see section 2.6 of our 2023 Climate-Related Disclosures Report for further details - NatWest Group’s initial Climate transition plan was developed with reference to the UK’s statutory commitment to reducing greenhouse gas emissions to net zero by 2050. To assess the climate impacts of policies on our climate transition plans, we used the UK CCC Balanced Net Zero (BNZ) pathway scenario, aligned with the UK’s Sixth Carbon Budget, as a starting point.

Climate Transition Plan – Progress update

We continue to support our customers’ transition by offering products and services, as well as engagement and education tools like Carbon Planner and our Home Energy Hub. Our progress across sectors varies based on actions we take in providing products and services, as well as government policies, which provide an impetus to drive customer demand and technology developments. In particular:

The funding of renewable electricity generation and therefore its overall expansion has reduced the dependence on fossil fuel generation, resulted in a decrease in absolute emissions by 1.7 MtCO2e and physical emissions intensity by 53%, between 2019 and 2022.
Scope 1 and 2 absolute emissions and physical emissions intensity for the oil and gas sector has reduced by 1.5 MtCO2e and 12% respectively.
In Residential Mortgages, we have provided £9.3 billion funding for EPC A and B rated properties since July 2021, including £3.9 billion in 2023.

Property Related Sectors

As one of the largest mortgage lenders in the UK, we have a key role to play in supporting consumers and businesses in transitioning to more energy efficient homes and buildings that are warmer, cheaper to heat, and generate lower emissions. Buildings are the UK’s second highest-emitting sector, accounting for 17% of total emissions. Decarbonisation will require retrofitting existing buildings to enhance their energy efficiency, constructing new energy efficient buildings and reducing emissions associated with electricity and heating supplies.

Food Related Sectors

Agriculture has a vital part to play in ensuring food security in the UK economy and our continued support in transition as a market leader is central to this. Food-related sectors represent 35% (Source: WRAP 2022 Report – includes food and drink sourced domestically and overseas) of UK greenhouse gas emissions. As a leading bank supporting UK farming, NatWest Group has an opportunity to play a key role in supporting the UK farming community in its transition to net zero while managing a variety of cost pressures.

Mobility Related Sectors

Mobility-related sectors can decarbonise through a reduction in demand for travel or a shift in transport modes, for example, from private car to public transport, supported by improved energy efficiency and the decarbonisation of energy.

Energy Related Sectors

Energy impacts every system and sector, as it provides the physical means to transform natural resources into goods and services that benefit society, which may in turn generate further emissions.

Our Transition to Net Zero

NatWest Group’s ambition to be net zero by 2050 across financed emissions, AUM and our operational value chain is aligned with the 2015 Paris Agreement’s overarching goal to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°c above pre-industrial levels.

As our Climate transition plan illustrates, we aim to help address the climate challenge, but we cannot transform the real economy on our own. We are dependent on society’s readiness to accept and support necessary changes for large-scale decarbonisation, reinforced by timely and appropriate government policy and continuous technological development.

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For full details, please see our 2023 Climate-related Disclosures Report (PDF 10MB)

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Climate and sustainable funding and financing

Read more about our ambition to play a leading role in championing climate solutions by supporting its customers’ transition towards a net-zero through Climate and Sustainable Funding and Financing.

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Our own operational footprint

Read more about our ambition to halve our direct own operations emissions by 2025 from a 2019 baseline, and our underlying progress.

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Nature and climate change

Read more about our recognition of issues relating to natural capital and our journey towards reducing negative impacts.

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Our approach to climate change

Our climate strategy

Climate Progress highlights

How we are helping to address the climate challenge

Our systems thinking approach

Climate transition plan

Our strategic approach to climate change

Climate Transition Plan – Scope and approach

Climate Transition Plan – Progress update

Our Transition to Net Zero

Related content

Climate and sustainable funding and financing

Our own operational footprint

Nature and climate change