London, 10th April 2025 – Financial institutions (FIs) worldwide are attempting to decarbonise, but are still reluctant to reduce their fossil fuel investments, according to a new report by South Pole, which surveyed sustainability executives from 350 financial sector firms across 13 countries.
Despite existing net zero guidance from the Glasgow Financial Alliance for Net Zero (GFANZ) and the Science Based Targets initiative (SBTi), the findings of South Pole's 2024/25 Net Zero report indicate many FIs are taking selective steps towards decarbonisation.
The report reveals that nearly three-quarters (72%) of surveyed FIs have no intention of reducing their fossil fuel exposure over the next 10 years. Almost a third (27%) are choosing to make more conservative claims regarding their net zero strategy or green credentials. The report also highlights that 47% of financial institutions cite unclear regulation as a barrier to their net zero progress.
At the same time, almost half (44%) of FIs are planning to increase their exposure to green assets in the next 10 years, and nearly 80% of FIs find companies with a climate transition plan more attractive to finance. On top of this, the majority (88%) said they expect to "increase" their levels of engagement with their portfolio companies on decarbonisation in “the next two years", with many (44%) saying they expect to increase this engagement "significantly". The majority (86%) report to be on track or partially on track to meet net zero commitments.
Dr Daniel Klier, CEO of South Pole said: “The survey results demonstrate that financial institutions continue to back investments in green infrastructure and are willing to increase their exposure to climate-resilient assets and portfolio companies. However, it is also clear that the sector is no longer taking an active role in shifting the balance and will continue to finance fossil fuels. Financial institutions want to have their cake and eat it too."
He added: "While the financiers surveyed continue to drive climate-related engagement with their clients, it also becomes clear that financial institutions have to walk a tightrope, balancing the long-term resilience and efficiency of their business against returns for investors in the short term. It is important to embrace the positive tipping points created by new, cleaner, and more competitive technologies; but the sector is running major transition and physical risks when it delays its response to obvious climate tipping points."
Dame Inga Beale, South Pole's Chair of the Board, commented: “Insurance companies have long been leaders in risk management, and the latest South Pole report shows how they are often ahead of other financial institutions in navigating the challenges of decarbonisation. Notably, the highest percentage of respondents enacting 'more stringent decarbonisation requirements' were from the insurance sector. This focus on sustainability is an essential risk mitigation strategy to hedge against climate-related impacts on insured assets. Those who proactively manage risk today will be better positioned for success tomorrow."
Kimberly Tan, Head of Investments, Managing Director, GenZero, said: "The findings of South Pole’s report underscore the complexity of the financial sector’s transition to net zero. While the persistence of fossil fuel investments reflects a certain pragmatism, plans to increase financing of green assets and a continued commitment to net zero targets demonstrate resilient underlying support for climate action amongst financial institutions. The finance sector’s capital allocation decisions and engagement with portfolio companies on their climate transition plans will ultimately dictate the world’s pace of decarbonisation."
ENDS
Margot Seeley, Head of Sustainable Investment at ABN AMRO Investment Solutions, said: "What resonates most powerfully to me is the revealing dynamic between increased climate communication and shifting ambition in the financial sector. While institutions communicate more extensively about climate strategies, the fact that one in four are making more conservative net zero claims represents a troubling trend. As the climate crisis intensifies, scaling back ambitions creates a dangerous gap between necessary action and commitments. We risk falling short of the transformative change required if financial institutions prioritise cautious, achievable targets over the bold action that science clearly demands. The race to net zero is not one where we can afford to moderate our pace."
About the 2025 Net Zero Report:
Media contact: media@southpole.com
The 2025 Net Zero Report focuses on financial institutions, how they are progressing on net zero targets and what they expect from portfolio companies. Download it now.
South Pole is the world's leading carbon asset developer and climate consultancy.
Since 2006, South Pole has been a trusted partner and advisor to governments, public sector organisations, and leading businesses on their decarbonisation journeys. South Pole serves over 1,000 clients across the world, and its global team of experts has helped many Fortune 500 businesses implement comprehensive strategies that help build resilience and turn climate action into long-term business opportunities.
In line with its mission to deliver true climate impact for all, South Pole has used the power of markets to help channel climate finance to over 850 projects in more than 50 countries across the globe. To date, these projects have helped reduce over 200 million metric tonnes of CO2 emissions, accelerated low-carbon transformations across several sectors, and provided measurable benefits to communities vulnerable to climate change.
The business is supported by world-class investors, including Temasek's GenZero, Lightrock, Corisol, and Salesforce Ventures.
South Pole is a social enterprise recognised by the World Economic Forum's Schwab Foundation, and committed to becoming a B Corp globally across all of its local entities.
For more information, visit www.southpole.com or LinkedIn.
On the 13th of May, we will host a live webinar where we will dive into key net zero progress insights with in-house experts and speak to clients from the industry.
The webinar will include reflections on the report findings, real-world examples and discussions on how financial institutions are driving the climate transition.
We help companies with environmental targets, funding, renewables, biodiversity with expert guidance & Luumo platform for resilience and net-zero road maps.
Download our 15-minute guide on climate transition plans. Discover how this blueprint for business transformation can drive resilience, innovation, and long-term value while meeting climate regulations.
Our team of experts can help you plan, purchase and invest in high quality climate and environmental projects that are aligned with your decarbonisation and net zero strategy.
With over 18 years experience, we can help you navigate challenges and changes in the market.
