UK Financial Institutions Sustainability Benchmark. The sector is moving.

Materiality, in the context of sustainability, is a determination of the most important environmental and social issues to be managed and reported by a company. A basic assessment considers how these issues contribute to financial risks and opportunities — this is financial materiality, required under the ISSB's standards making their way into UK legislation through UK SDS and FCA listing rules.

Of the 51 institutions analysed, one third had conducted an assessment. Materiality disclosures were most prevalent in established Full Service Banks (70% had disclosed) and larger institutions. Yet only 22% of institutions with 500–2,000 employees had disclosed materiality considerations — a significant capability gap that needs closing.

55% had a clear sustainability strategy in place, 10% had a partial one, and 35% had no strategy at all. Of those with a strategy, 43% had it embedded within or clearly linked to the core corporate strategy. Only 27% had clearly linked their sustainability strategy to a materiality assessment.

The theme dominance tells a story. Climate was the most common sustainability strategy theme (referenced in 57% of institutions). Socio-economic impact, often the single most powerful story for a bank or building society, appeared in 37% of strategies, frequently under-told and under-valued.

Purpose matters. 47% clearly articulated an organisational Purpose. For building societies and fintechs in particular, Purpose is a commercial differentiator. Those using it well are ahead of the curve.

Scope 1 & 2 reporting is well established, driven by mandatory SECR requirements. TCFD reporting is more patchy: 41% have full TCFD disclosure, 18% partial, and 41% none at all — though the latter are largely smaller institutions only recently falling into scope.

Financed emissions are the defining gap. Given that financed emissions typically represent around 90% of a financial institution's total footprint, the fact that only 33% were reporting them in 2023 represents a major blind spot. The combination of incoming UK SRS and PRA scrutiny means this will need to change rapidly.

TNFD is nascent but growing. Only 12% of institutions referenced the Taskforce on Nature-related Financial Disclosures. Given the TNFD issued its final recommendations in September 2023, wider adoption was still ahead. By 2025, this had grown to 14% (8 banks).

The sector's approach to climate targets in 2023 ranged from ambitious, science-aligned commitments to vague aspirations with little accompanying evidence of planning. 49% had a confirmed climate target, 18% had stated an aim or ambition, 4% were working towards one, and 29% had no target at all.

Of those with a net zero target, 24 out of 33 targeted 2050. Interim targets are where credibility is built or broken. 39% of the cohort had at least one interim climate target. Only 4 institutions had submitted targets to the Science Based Targets initiative (SBTi) — the bar for science-alignment.

Perigon's view: the direction of travel is right. What the sector needed was not more targets but more honest accounting of progress, more clarity on the pathways, and a more proportionate approach to what smaller institutions could realistically commit to.

Of the 51 institutions in the cohort, 43% were purchasing carbon credits described as 'offsetting'. Only 4% were purchasing credits using the more rigorous Beyond Value Chain Mitigation (BVCM) framing. 53% were not using any carbon credits.

The 'offsetting' problem. Carbon offsetting — the idea that you can neutralise your own emissions by funding reductions elsewhere — is not scientifically aligned terminology except where an organisation has already reduced emissions to a residual, hard-to-abate tail. Using it prematurely, particularly while making carbon neutrality claims, risks FCA anti-greenwashing scrutiny.

The BVCM distinction. Beyond Value Chain Mitigation acknowledges that purchasing high-quality credits is a positive additional contribution to climate action — not a substitute for reducing your own emissions. The largest banks were already moving towards BVCM language by 2023. This shift has since accelerated significantly across the sector.