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  • Writer's pictureMonika Jonusauskiene

Only 5 out of 24 Baltic Banks Commit to Net Zero: Time for the Rest to Step Up

Climate action is becoming crucial for all European financial institutions due to the rising influence of global frameworks like the Paris Agreement and regional regulations like the EU's Sustainable Finance Package. Net zero plans are the key climate action for banks not only to ensure regulatory compliance but also to unlock financial resilience, green growth, competitive advantage, and responsible leadership for a sustainable future.


A recent review of net-zero commitments by banks operating in the Baltics, conducted in February 2024 by Viridis Sustainability, shows uneven progress in current practices of sustainability reporting and commitment to net zero. The trend towards achieving carbon neutrality is driven primarily by subsidiaries of larger banking groups. The majority of smaller local banks, on the other hand, are yet to make formal net-zero commitments, a process that demands significant groundwork to achieve real and meaningful change.


 Sustainability disclosures need a significant boost

Our research examined the sustainability reporting practices of 24 banks operating in the Baltic states (across one, two, or all three countries). An initial screening for sustainability data and related disclosures revealed that only 11 of those surveyed (46%) publicly disclosed a sustainability report for 2022.

Out of the rest, we found that 4 banks have a small section dedicated to Environmental, Social and Governance (ESG) matters in their annual financial report and another 4 have a page on their website to discuss general sustainability principles.

However, this type of disclosure does not detail any emission data or measurable objectives to lower the bank's environmental impact. An official sustainability report is the central document that serves as an indication of a bank’s intentional effort to be transparent and a level of commitment to improving its practices to reduce the negative impact. Moreover, it is the primary platform to make official commitments and describe concrete sustainability plans and will soon enough hold equal importance to financial statements and be subject to auditing requirements.


 Commitments on financed emissions should be the crux of impact for banks

We then screened the available reports for net zero commitments. Before presenting the findings, it's crucial to differentiate between two distinct net-zero commitments banks are subject to – one relating explicitly to a bank's own operational emissions, with the other relating to financed emissions (comprising emissions from the bank's lending and investment activities). 7 and 5 out of 24 banks made these commitments respectively, as seen in the chart below.

While achieving carbon neutrality in a bank’s own operational emissions is a significant objective, it is considerably smaller – in scope, complexity, and impact – than attaining neutrality in financed emissions, encompassing the entirety of their portfolio. In fact, according to Net-Zero Banking Alliance (NZBA), a global association driving banks towards net-zero by 2050, "financed emissions are, on average, 700 times greater than banks' own operational emissions."



The following breakdown shows further examination of the 7 (29%) banks that made a clear commitment in the report to reach net zero in operational emissions, with only 4 (17%) of them indicating relevant interim targets.


There are some noteworthy points here: Firstly, we notice that Estonian bank LHV is leading the way – it has already reached net zero in operational emissions in 2022. Secondly, there is a significant variance in the target year across the surveyed institutions – 2022-2050. Thirdly, SEB Group has an ambitious goal of near zero absolute emissions and takes 2008 as the baseline year, which shows exceptional progress and forward-thinking.



As for reaching net zero in financed emissions, there are 5 banks (21%) operating within the Baltic states that have officially made such a commitment (see table below for breakdown). We see that overall, the interim targets are consistent amongst the 4 banks that have set them, with the notable exception of OP Financial Group where the target is lower at 25% across financed sectors. Importantly, Citadele Banka – the only bank that has made an official commitment in its sustainability report but has not set interim targets yet, is also the only one that is headquartered in the Baltics, specifically Latvia, while the other 4 are subsidiaries of large Scandinavian banks.



It is important to reiterate that financed emissions are the primary source of banks' climate impact. For instance, Danske Bank estimates that financed emissions account for more than 99.9% of their overall carbon footprint. This means that it is in effective collaboration with customers, providing transition strategy support, setting requirements to showcase Paris-alignment or at least emission reduction plans and abiding by them, that sustainability transformation lies.

A swifter move towards quantifiable goals is needed


To sum up, while there is growing awareness of the financial risks associated with climate change there is also a growing recognition of the potential opportunities that a transition to a low-carbon economy presents. Banks are facing increasing pressure from regulators, investors, and customers to align their operations with sustainability goals. As key players in the financial system, they hold immense power to influence investment decisions and guide businesses towards greener practices. Overall, while there is good progress being made by some financial institutions, a swifter move towards concrete quantifiable targets would have a desired trickle-down effect to the broader economy, starting with banks’ clients, who in turn would be stimulated to accelerate their own green agendas.

Authors of the article

Vaida Arlauskaite Linkedin

Monika Aleksiejute-Jonusauskiene Linkedin

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