Perigon's Banking Barometer 2025.
A picture of growing ESG maturity.
This is our third annual review of the UK financial services market and our biggest project yet as we went deeper on climate targets and also assessed the maturity of firms' AI adoption.
We also made our own benchmarking process more AI-native, adopting a human-in-the-loop approach to AI data collection and analysis. We built custom agents to parse annual reports, capture data, analyse long-form content and benchmark against our in-house frameworks. The checks we put in place give us confidence that the dataset is reliable enough to reveal meaningful real-world trends.
Emma Walford, CEO and Co-founder, Perigon Partners
Recommendations
- Keep brevity in mind when preparing for UK SRS, learning from Irish banks' CSRD response
- Net Zero targets without a transition plan is fast becoming a gap and credibility / regulatory risk
- Financed emissions measurement is rapidly becoming a hygiene factor
- Materiality assessments are under-utilised and should be built into planning
- A 'watch and see' approach to AI could pose major risk to the sector
Transition planning surged, page counts and nature investment quietly grew, but no moves yet on materiality assessments.
How has ESG reporting evolved and what does it imply about action behind the scenes?
Key takeaways
ESG reporting structure: CSRD adds length, trend towards ARA reporting
- European CSRD rules drove a significant increase in sustainability report length for Irish banks — one to watch ahead of UK SRS adoption
- 2024/5 saw a surge in climate transition planning, with initial plans now in place for 90% of full service banks and a third of specialist/challenger banks
- Quiet work is underway to increase rigour around carbon credits and expand voluntary investment in nature-related projects
This year saw a marked increase in the average length of sustainability content in annual reports, even as climate-specific disclosures fell slightly. The rise is almost entirely attributable to the Irish banks, reflecting the significant uplift required under the EU's new CSRD rules. UK banks will be watching closely in anticipation of incoming UK SRS requirements. Fintechs also expanded their sustainability content, which likely reflects growing scale, maturity and preparation for IPOs or future investment rounds.
Last year we noted early signs of banks consolidating sustainability disclosures into the annual report itself, reducing reliance on standalone ESG or climate reports. That trend strengthened this year: fewer banks issued secondary sustainability reports, although around a third of our sample still publish at least one additional report alongside the annual report.
Materiality: no rush, despite incoming UK SRS
Materiality assessments identify which sustainability topics are most relevant to a business. Under CSRD, businesses must consider both financial materiality and impact. In the UK, incoming UK SRS will require financial materiality analysis — but we do not believe this can be done well without also considering impact.
We expected the imminence of UK SRS to spur more first-time assessments in FY24, beyond the approximately 30% who had previously undertaken one. This was not the case — the figure remained flat for the third consecutive year.
Done well, materiality can provide a powerful lens for shaping strategy; done as a compliance exercise, it is simply a cost. Banks would be wise to plan ahead for UK SRS to maximise the strategic insight from any materiality work.
Transition plans: anticipated surge confirmed
Following the release of the Transition Plan Taskforce (TPT) framework, we anticipated a surge in transition planning activity. This is now confirmed: 37% of banks state they have a climate transition plan (21 banks up from 9 last year) although only a subset of these have published their plan.
Nature & carbon credits: investment growing, neutrality claims retreating
We mentioned in last year's report that banks appear to be taking a more measured approach to nature-related financial disclosures, likely shaped by past experience of setting ambitious climate targets too quickly, only to scale them back later. The challenge is compounded by the greater complexity of measuring nature-related impacts.
The Taskforce on Nature-related Financial Disclosures (TNFD), launched in 2021 and issuing its final recommendations in 2023, has not yet been embedded in UK regulation. However, its framework may be incorporated into future ISSB standards and ultimately adopted under UK SRS. Despite the absence of a compliance requirement, we have seen steady growth in banks voluntarily referencing nature-related risks and investing in nature-focused initiatives.
Anecdotally, some of this nature investment is about taking positive action whilst carbon credit markets undergo integrity challenge and improvement. This theory is further supported by the reduction in banks purchasing carbon credits to "offset" emissions this year, which is only partially due to the (correct) terminology switch from "carbon offsetting" to "beyond value-chain mitigation".
GHG emissions coverage is growing but the road to comparability is long.
Have tighter regulations changed how banks report and measure emissions?
Key takeaways
- Incremental improvements in emissions coverage — expected to continue as banks prepare for tougher scope 3 disclosure requirements
- Clear efforts to reduce building-related emissions (scopes 1 and 2); however, business travel emissions intensities have increased
- 49% now report at least partial financed emissions — up from 33% in 2023 — with 31 banks disclosing intent to improve further
Reporting of scopes 1 and 2 has long been mandatory under SECR for all but the smallest institutions, but scope 3 is optional. The combination of incoming UK SRS and the PRA's recent consultation on climate risk (CP10/25) means UK banks now face mandatory scope 3 reporting, including financed emissions. However, challenges around data availability and quality remain significant and, despite the efforts of various frameworks, notably the Partnership for Carbon Accounting Financials (PCAF), methodologies are still far from consistent.
Coverage of emissions reporting is gradually increasing
Scope 1 and 2 reporting has remained broadly stable at around 88% of the cohort, with incremental new reporters each year. Operational Scope 3 reporting edged up from 35% to 39%. Financed emissions reporting saw the largest jump, rising from 39% to 49% of the cohort, with 7 banks reporting for the first time in FY24.
Operational emissions: progress on scopes 1 and 2 — but business travel a watch-out
Scope 1 emissions intensities are being reduced without a corresponding jump in Scope 2, indicating energy efficiency and renewable actions are also taking effect. Business travel emissions intensity is creeping up in certain sub-sectors.
Building societies are making steady progress decarbonising branches and offices and have the lowest business travel emissions intensities, reflecting the regional presence of many.
Financed emissions: reporting is rapidly becoming a hygiene factor
Disclosure of financed emissions has been universal across the largest banks for some years. We now see strong momentum behind mid-tier and smaller players catching up, reflecting growing understanding of the materiality of financed emissions, usually more than 90% of a financial institution's overall footprint, and reflecting regulatory and legislative pressure for banks to demonstrate a good understanding of these exposures.
Climate targets are growing in number and credibility.
Are banks stepping back from, or doubling down on, decarbonisation commitments?
Key takeaways
- Trend towards more, more complete and more credible climate targets — despite media narrative of retreat
- Significant push from fintechs on interim climate targets, indicative of growing maturity and IPO ambitions
- Important to focus on proportionality, pragmatism and openness into 2025/6
This year we conducted a deeper dive into interim targets using AI to analyse whether targets had, on balance, been tightened or slackened. These sorts of changes are still not reported transparently by the majority. Our 2025 analysis suggests we're slowly moving in the right direction. Smaller banks and fintechs drove an increase in the number of interim targets set, reducing the gap to larger full service banks.
1 in 4 banks don't mention AI at all. Many others are just watching.
How proactively are UK banks facing into AI threats and opportunities?
Key takeaways
- 1 in 4 banks made no mention of AI in their latest annual report
- AI maturity was typically higher for larger, publicly owned full-service banks. Building societies were notable laggards even when controlling for size.
- Only 9 banks (16%) appeared to be working with AI at a strategic or embedded level. None are yet taking a GenAI Native approach.
Since ChatGPT's launch in November 2022, AI has been the fastest-ever rollout of a new general-purpose technology. Our house view is that GenAI will entirely reshape our economy, whether in its current form or as a precursor to AGI. Yet we think it likely that banks will be too busy looking at AI through a traditional cost and efficiency lens to keep relevant in an intelligence-age world.
To understand how and to what extent banks were considering the application of AI in their business models, we developed an AI maturity scale and built an AI agent to assess each of our cohort banks' ARA disclosures against it. Since reporting season, we are aware of many announcements from banks on AI investment so expect a significant leap forward by next year's reporting.
Explore the data yourself.
Choose your X-axis grouping and Y-axis metric to generate a chart. The full dataset covers 57 institutions across all five themes.
Cohort and definitions.
Timing
Assessment was based on publicly available annual reports and supplementary documents as at our cut-off date, 16 July 2025. For the majority of banks, this meant full year 2024 results were included. Where results were published late, or banks had a different year end date, the alternative latest available disclosures were used.
Three firms were removed from the previous year's cohort due to M&A activity (Belmont Green, Co-op Bank, Virgin Money), three were removed as latest disclosures were not published by our cut-off date (Atom Bank, Hampshire Trust Bank, Tide) and three were added (HSBC, Cambridge Building Society and Vida Bank).
Full Service Banks (10)
Specialist / Challenger Banks (22)
Fintechs (9)
Building Societies (16)
Glossary
- BVCM
- Beyond Value Chain Mitigation — investment in GHG reduction outside a company's value chain.
- CSRD
- Corporate Sustainability Reporting Directive — EU regulation mandating sustainability reporting from 2024.
- GenAI
- Generative Artificial Intelligence — AI capable of generating text, images or other content.
- ISSB
- International Sustainability Standards Board — issues sustainability and climate disclosure standards.
- PCAF
- Partnership for Carbon Accounting Financials — methodology for measuring financed emissions.
- SBTi
- Science Based Targets initiative — defines best practice in science-based target setting.
- TNFD
- Task-force for Nature-related Financial Disclosure — global nature disclosure recommendations.
- TPT
- Transition Plan Taskforce — developed the gold-standard framework for climate transition plans.
- UK SRS
- UK Sustainability Reporting Standards — based on ISSB standards, replacing TCFD requirements.