In Spain, large companies, including banks, are required by Law 11/2018 to disclose non-financial information on environmental matters. Not only with regard to the impacts of their activity on climate change, but also on everything related to the environment, such as the protection of biodiversity, the sustainable use of resources and pollution, among other issues. However, the main Spanish banks persist in failing to comply with transparency requirement by focusing mainly on climate change and with deficits. This is one of the conclusions of the study “Spanish banks and the reporting of environmental issues: Analysis of Non-Financial Information Statements 2022” prepared by the International Institute of Law and Environment.
The study focuses specifically on the analysis of the information disclosed by Santander Bank, BBVA, Caixa Bank, Sabadell Bank and Bankinter for the 2022 financial year. This is the fourth report of these characteristics presented by the Institute, which has been studying this subject in depth since 2019 and presenting its results on an annual basis.
In 2022 –almost five years after the entry into force of the regulation-, although there is a certain trend towards improvements compared to previous years, the information disclosed is still insufficient to know the exposure of these banks to climate risks and, above all, to understand how they manage the adverse impacts of their activity on the environment. “Given their key role in the decarbonisation of the economy, it is necessary for financial institutions to comply with the requirements of current environmental legislation; even more so the recent adoption of de directive on corporate reporting on sustainability that will come into force in 2025, which is even more demanding”, says IIDMA’s director and co-author of the report, Ana Barreira.
The study analyses several issues. On the one hand, the application of the current legal framework on non-financial disclosure in Spain. On the other, the specific data disclosed, such as Greenhouse Gases (GHG) emissions attributable to the financial activity of banks, the voluntary decarbonisation targets to reduce these emissions and the measures implemented to achieve the targets. In addition, it examines the management of climate risks linked to the financial of banks, as well as their impact on biodiversity.
Thus, with regard to Greenhouse Gases (GHG) emissions attributable to the financial activity of banks, there has been a general improvement in the quality of the information disclosed. Likewise, Bankinter and BBVA have begun to disclose specific data on the emissions of their mortgage portfolio. However, there is a striking lack of information on the disclosure of voluntary targets for reducing carbon emissions in some sectors in the medium term or on the negative impacts that their activity has on biodiversity: “Banks cannot hide behind a lack of metrics when they have been developing regulations for more than three decades; metrics are useful, but as long as they respect the legislation that is binding in a state governed by the rule of law and where banks carry out their activity”, says Barreira.
The fight against global warming requires the structural transformation of the financial system and its structures and processes, involving governments, central banks, commercial banks, institutional investors and other actors. Through its financial activity, commercial banks play a key role in the decarbonisation of the economy: companies active in carbon-intensive economic sectors, such as energy, industry and transport, depend on their support to develop their activities. Consequently, banks need to stop financing projects whose GHG emissions are incompatible with the achievement of the Paris Agreement targets.
Therefore, in order for Spanish banks to comply with the requirements of Law 11/2018 in relation to the disclosure of environmental information, the International Institute of Law and Environment recommends to Spanish banks:
- Expand the information disclosed regarding the Greenhouse Gases (GHG) emissions it finances.
- Disclose data on the specific impacts of the measures implemented to reduce GHG emissions from its financial activity.
- Use the key performance indicators (KPIs) published in the European Commission’s June 2019 Climate Supplement to improve the comparability of the climate information disclosed.
- Disclose relevant and comparable data regarding the adverse impacts of its financial activity on biodiversity and the environment, as well as the measures implemented to reduce these impacts.