Shareholder activists have launched sharp criticism against Santander, accusing the banking giant of "quietly diluting" its commitments to reduce planet-heating emissions linked to its financing of fossil fuel and aviation companies. The controversy erupted as Santander updated its climate alignment targets, which the bank claims now better reflect the "real pace of transition" toward a greener future.
Key Changes to Santander's Climate Policy
In a significant shift, Santander has abandoned its previous target to cut all emissions associated with its oil and gas sector financing. This has been replaced with a new target that focuses solely on Scope 1 and Scope 2 emissions, while Scope 3 emissions are no longer subject to specific reduction goals.
Scope 3 emissions encompass all indirect carbon emissions generated by a business, such as those from the use of products it sells. These emissions account for the overwhelming majority of greenhouse gas outputs in many industries, making their exclusion from targets a major point of contention.
Santander stated that Scope 3 emissions have been moved to a "monitoring" framework. The bank explained in its annual report that this approach acknowledges the role of producers in reducing operational emissions while recognising that fossil fuel consumption is largely driven by demand-side factors, like the electrification of transport and heating.
Further Dilution of Environmental Commitments
Additionally, Santander has dropped its specific target to reduce emissions from financing the aviation sector, opting instead to monitor these emissions without binding reduction goals. The bank has also revised its policy to set financed emissions for polluting sectors as a range rather than a single figure.
The lower end of this range aligns with globally recognised scenarios consistent with limiting global warming to 1.5°C, while the upper bound corresponds to a scenario of 1.7°C warming. This change provides Santander with greater flexibility but has raised concerns about accountability.
Activist and Industry Reactions
Elliot Thornton, senior research manager for shareholder activist group ShareAction, condemned Santander's actions, stating: "After already rolling back key fossil fuel policies, Santander has now quietly diluted the ambition of its targets to cut emissions driving dangerous global heating. The bank has scaled down its target for oil and gas so that it leaves out the vast majority of the pollution the sector is responsible for, making it one of the weakest across all major European banks."
Thornton argued that investors "cannot rely on a strategy that shifts the goalposts the moment progress becomes inconvenient," highlighting growing frustration with corporate climate backtracking.
Broader Banking Sector Trend
Santander's move follows a wider trend in the global banking sector, where lenders have been watering down their green commitments over the past year. This shift has been driven by fractured political consensus on climate action and the return of Donald Trump to the White House, which has influenced regulatory and market dynamics.
Several major US and UK banks exited the industry's coalition for climate target setting last year, leading to the dissolution of the Net Zero Banking Alliance. Following this trend, HSBC became the first British bank to leave the banking sector's global alliance for setting climate targets, signalling a retreat from earlier ambitious environmental pledges.
The dilution of climate targets by major financial institutions like Santander raises critical questions about the banking industry's role in supporting the transition to a low-carbon economy and its accountability to stakeholders demanding stronger environmental stewardship.
