Serious concerns have been raised about the sustainability commitments of global financial institutions, as fresh research shows that the majority have no intention to reduce their exposure to fossil fuels in the near future.

Carbon consultant South Pole’s 2025 Net Zero Report  exposes a net-zero credibility gap among financial firms with nearly three-quarters (72%) having no plans to reduce their fossil fuel use over the next decade, while more than a quarter (27%) are opting for cautious, minimal claims about their net-zero strategies.

Surprisingly, smaller organisations are more likely to be planning a move away from fossil fuels (30%) than larger financial institutions (26%), but overall, only a third of firms take pains to measure the real economic decarbonisation of their portfolios. 

Despite these shaky green credentials, of the 350 financial institutions surveyed across thirteen countries, the vast majority (86%) reported being ‘on track’ or ‘partially on track’ to meet their net-zero targets, with almost half (47%) citing unclear regulations as a barrier to their ambitions.

The report highlights that the complex and shifting regulatory landscape is, however, improving most firms’ sustainability measures. 

More than half (52%) of financial institutions reported that they are changing their net-zero strategies to more closely align with industry requirements, while 48% said that regulations are the most likely factor to impact the communication of their net-zero strategy.

A majority (57%) also said that they are adjusting their net-zero claims to improve transparency and align with regulations that are clamping down on attempts at greenwashing.  

Progress is evident elsewhere, too, as the report found almost half (44%) of financial organisations are aiming to increase their exposure to green assets over the next decade, and nearly 80% find companies with a solid 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.

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Financial institutions are also planning to prioritise reducing their operational carbon footprint (37%), integrating climate risks into their decision making (37%), enacting stronger requirements for decarbonisation among portfolio companies (35%), and reducing their absolute finance emissions (31%)

Encouragingly, only 2% said they had no plans around decarbonisation.

“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,” said Dr Daniel Klier, CEO of South Pole.

“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.”