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Approach to climate change

We recognise that climate change is a critical global issue which has significant implications for our customers, employees, suppliers, partners and ourselves. NatWest Group has many years’ experience in supporting our customers’ transition to a low carbon economy but the scale and pace of activity required is now rapidly accelerating. Our ambition is to be a leading bank in the UK & RoI helping to address the climate challenge; by making our own operations net carbon zero in 2020 and climate positive by 2025, and by driving material reductions in the climate impact of our financing activity. We are setting ourselves the challenge to at least halve the climate impact of our financing activity by 2030, and intend to do what is necessary to achieve alignment with the 2015 Paris Agreement.

During 2019, we committed to and joined a number of major initiatives to support this, including:

  • Becoming a founding signatory of the UN Environment Programme Finance Initiative’s (UNEP FI) Principles for Responsible Banking which commits us to work towards aligning our strategy with the overall objectives of the 2015 Paris Agreement. 
  • Jointly the first company globally to commit to all three of the Climate Group’s initiatives on electric vehicles EV100, renewable energy RE100 and energy productivity EP100.
  • Participating in the UNEP FI scenario analysis pilot.
  • Joining the Climate Financial Risk Forum, established by the FCA and the PRA to develop practical tools to address climate-related financial risks.

Climate risk was classified as a top risk in 2019 and we are working to integrate climate related financial risks into our core risk framework. NatWest Group has also continued to engage with investors, NGOs and other key stakeholders on the actions we are taking to play our part in addressing this important issue.

We remain committed to developing our disclosures in line with the Task Force on Climate related Financial Disclosures (TCFD) recommendations. The 2019 TCFD Report can be found in our Strategic Report (PDF 7.1MB).

The table below summarises the work done in 2019 and future planned activity related to each of the TCFD themes:

Theme
2019
2020-2021
Governance

Focus on further increasing internal climate related knowledge, skills and abilities at senior levels.

Climate change governance roles and responsibilities refreshed, including Senior Managers Regime (SMR) responsibility.

Further establish climate change reporting and monitoring rhythm at Board and Executive level across the NatWest Group structure.

Continue to enhance Board-level and executive knowledge and visibility of climate change related issues ahead of broader strategic and risk appetite integration discussions.

Strategy

Internal review of climate related risks and opportunities. Continued engagement with external partners to inform development of climate change strategy.

Further develop and implement Group strategy to address climate change that is wholly aligned to NatWest Group’s overall vision, purpose, strategy and plan.

Scenario analysis

Detailed review of methodology and best practice as it emerges in the market, including participating in the UNEP FI TCFD scenario analysis pilot.

Develop our climate risk scenario modelling and stress testing capabilities. Carry out climate scenario and stress testing analysis, in particular as part of the 2021 climate risk Biennial Exploratory Scenario (BES) exercise (starting H2 2020). This will develop understanding of how climate risk interacts with key exposures.

Risk Management

Targeted analysis for climate change/physical risk impact on UK residential mortgage portfolio using a range of climate change scenarios.

Commenced updating of NatWest Group’s Enterprise Risk Management Framework to include climate change in the risk toolkit.

Continued review of the Environmental, Social, Ethical (ESE) Risk Management sector policy positions.

Risk identification and measurement, risk management, risk monitoring, and risk reporting to be performed in line with principles set out in the Enterprise Wide Framework.

Embed climate change consideration in NatWest Group's risk appetite framework in a qualitative manner until climate risk indicators allow incorporation on a quantitative basis. In particular, perform targeted sector and product reviews to improve measurement and assessment of climate related risk factors to inform future management actions.

Metrics and Targets

Sustainable energy funding and financing target of £10 billion for 2018-2020 substantially met in 2019 (£9.9 billion in 2018 and 2019).

Jointly the first company globally to commit to RE100, EV100 & EP100.

Additional £20 billion funding and financing for climate and sustainable finance between 2020 and 2022. Refer to the strategy section for further targets set as part of our ambition to be a leading bank in the UK and RoI helping to address the climate challenge.

Related content

To find out more on how we are managing reputational and environmental, social and ethical (ESE) risks please visit the relevant pages:

ESE & Reputational risk management
Equator Principles
Soft Commodities Compact
Download our ESE risk policies

Other related content:

Climate & sustainable finance
Operational environmental footprint

(*) Limited assurance provided by Ernst & Young LLP.