Lloyds Banking Group

overall rating:



Yining Kong
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Lloyds Banking Group is one of the UK’s largest financial institutions with 30 million customers and 65,000 employees. They provide a wide range of services such as commercial banking, insurance, and consumer finance. Lloyds has done pretty well in terms of supporting marginalised groups and embracing diversity and inclusion within the organisation. While it is working towards zero net carbon, the future prospect is uncertain. I also wish there was more publicly available information about their sustainability efforts prior to 2021. 


What it's made of:


Since Lloyds is a large business with various services, a good starting point to analyse its sustainability is to look at the sustainability ratings provided by external agencies. In Lloyds’ 2021 ESG report, they have outlined the ratings given by various ESG indices and scorings. There is an overall positive trend over the three-year period from 2019 to 2021. However, there are huge variations across these ratings. For instance, while MSCI, Sustainalytics, and FTSE4GOOD give high ratings, the rating by ISS ESG Corporate rating suggests that Lloyds is quite bad at sustainability. Several other agencies give mediocre ratings. The difference could be due to their different approaches and the different aspects of sustainability valued by the rating agencies. Overall, Lloyds’ ESG achievements seem to be mixed. 


As an organisation, Lloyds has supported the transition to a low carbon economy. In 2021, more than £6.9 billion of green finance was delivered to support the transition of various sectors including agriculture and real estate development. They also introduced a fossil fuel fund to allow pension savers to choose to invest in UK companies pursuing positive environmental impact. This is definitely a good move. However, since they are such a big financial institution, I think that they should have launched the fund much earlier. Moreover, since they only started ESG reporting in 2021, it is quite hard to check what they have done in the past in terms of contributing to ESG. Thus, I cannot give them a very high rating. 


If we dig deeper into its operations, it is not hard to see that Lloyds has put effort into doing more socially responsible things. During the difficult time of the Covid-19 pandemic, it supported over 93,000 small businesses and start-ups in 2021. It has delivered £2.4 billion new funding that is related to sustainability improvements in the social housing sector. It also supported financial inclusion by providing banking for people experiencing homelessness and financial abuse, and those who are victims of modern slavery. Thus, they are at least trying to contribute to different aspects of sustainability.

How it's made:


Currently, Lloyds has not divested from oil and gas completely since they recognise the importance of these sectors in providing energy security for the country at the moment. Instead, as a founding member of the Net-Zero Banking Alliance, Lloyds has committed to set sector-level financed emissions targets for oil and gas. The methodology is explained clearly in their ESG report and I think it is good to have such a high level of honesty and transparency. In addition, Lloyds supports the green power sector such as wind farms by financing them and incorporating them in investment portfolios. Lloyds’ investment in oil and gas decreased to £0.3 bn in 2021 from 2 £bn in 2020, while the investment in fossil fuel-free companies is above £5 bn in 2021. In addition, more than £6.9 bn of green/ESG-related finance was delivered in 2021. 


Lloyds has established a goal to ensure its own operations are net zero by 2030. They would also want the emissions they finance to be cut by more than 50% by 2030, on the path to net zero by 2050 or sooner. This aligns with the international scientific consensus that it is important to achieve net zero by 2050 to avoid catastrophic climate consequences. However, since this means that Llyods needs to halve the emissions in the next 10 years, there is no guarantee that it is achievable. While there is very detailed information and calculation of the estimated emissions by the bank and its related entities, Lloyds does not go into details about how the goals would be achieved in the future so we do not know if they are just bragging at the moment. Moreover, since they are such a large and influential company, I would expect them to achieve net-zero earlier than the international guideline.

Who makes it:


Lloyds has achieved high scores in the Bloomberg Gender-Equality Index and Workforce Disclosure Initiative. Specifically, 40% of the board members in 2021 are women and 20% are from a minority ethnic background. While this is not perfect, it is better than most firms in the banking industry. However, I would still want to see more improvements in terms of the gender balance in the senior managers group. 


Lloyds has partnered with charities including Mental Health UK and Woodland Trust to bring positive social changes. They have also funded charities like African Caribbean Community Initiative to support members of the local communities. 


Despite these socially responsible efforts, Lloyds has been involved in several controversies since the start of the 21st century, including tax evasion, LIBOR rate manipulations, links to arms trade, and phishing email scams. Thus, I would not give them a perfect rating.