On 30 September, we hosted the latest State of the Lender Transition webinar, where we launched our 2025 industry assessment and league table of 85 UK mortgage lenders. The results show real progress across the sector: disclosure is now becoming the norm, data quality is improving, and leaders are beginning to embed climate into risk management and customer propositions. But the findings also make clear that the pace of genuine decarbonisation is still too slow.
This year’s assessment arrives at a turning point. The global IFRS S2 disclosure standard will soon make quantified, decision-useful climate reporting mandatory. The PRA’s CP10/25 proposals will hardwire climate into governance, stress testing, and capital planning by mid-2026. At the same time, MEES reforms could be confirmed as early as October, raising the immediate stakes for buy-to-let portfolios. For lenders, the message is simple: transition planning can no longer be treated as optional.
Progress is real, but uneven
The biggest change since 2024 is the surge in reporting. Eighty-five per cent of lenders now publish on climate, almost double last year’s figure, and nearly half have produced climate-related financial disclosures aligned with TCFD or the forthcoming IFRS S2 framework. Financed emissions reporting has also expanded, with 38 per cent now disclosing absolute or intensity metrics, compared to just 23 per cent in 2024.
Yet progress is uneven. While more lenders are disclosing, fewer than half are meeting the standards of IFRS S2, with quantification and transparency still lagging. Data quality is particularly weak. Most lenders remain heavily reliant on EPC data, despite its well-documented inaccuracies, and four in five still do not publish PCAF data quality scores. Without this transparency, it is impossible to tell how much of the progress reported reflects genuine decarbonisation and how much simply reflects changes in methodology.
The transition risk paradox
Another theme to emerge this year is the imbalance between physical and transition risk. Lenders are investing heavily in modelling the long-term impact of flooding and other physical hazards, but far fewer are running scenario analysis on transition shocks such as MEES. Only 21 per cent of lenders quantify transition risk compared with 34 per cent for physical risk, despite the fact that MEES deadlines could affect mortgage portfolios much sooner and more severely.
This “transition risk paradox” shows why lenders must look beyond simple EPC disclosure. Stress testing the cost of reaching EPC C, and how this interacts with loan-to-value ratios and arrears risk, provides a more accurate picture of portfolio vulnerability than headline ratings alone.
Financed emissions without decarbonisation
Although disclosure has expanded, reductions in financed emissions remain well short of the trajectory required for a 1.5°C pathway. In many cases, reported decreases reflect improvements in data inputs rather than genuine structural change. Under IFRS S2, lenders will be expected to rebaseline when methodologies evolve and to be explicit about whether changes are due to improved measurement or real-world decarbonisation. Until then, financed emissions reporting risks being more about compliance than about climate impact.
Retrofit finance is growing in the wrong places
The report also finds that while retrofit finance is expanding, it is poorly targeted. Most lenders continue to design products for properties already at EPC A or B, leaving the bulk of the housing stock – homes at risk of MEES non-compliance – underserved. Where retrofit products do exist for lower-rated homes, they are often packaged as “maximum retrofit” offers that include costly and unnecessary measures, putting them out of reach for most households.
The opportunity lies in reframing retrofit around affordability and return on investment. The case is strongest when lenders show borrowers that modest upfront measures, financed over the long term, can cut bills and mortgage costs while safeguarding property values. Unless lenders reposition their propositions in these terms, retrofit finance will remain a niche product rather than the mainstream growth driver it could be.
Spotlight on Nationwide
Nationwide Building Society, ranked top in this year’s league table, used the webinar to share how it has integrated climate into its group strategy following the acquisition of Virgin Money. Amy Thomson, Head of Sustainability, explained that Nationwide has aligned its climate targets across the enlarged group and expanded its strategy to include support for SMEs, recognising the role small businesses play in the transition.
She described how the Society has enhanced its climate scenario analysis by stress testing both transition and physical risks, even modelling the impact if these shocks occurred simultaneously. The results suggest that credit losses remain relatively low, but the exercise has strengthened Nationwide’s understanding of how to embed climate into risk and capital planning.
Nationwide has also been clear about where it can and cannot exert control. While it has almost fully decarbonised its branch estate and switched to 100 per cent renewable electricity, it recognises that downstream emissions from mortgages are far harder to influence. In the mortgage space, it has piloted a 0 per cent interest additional borrowing product to support retrofit, though Amy acknowledged that take-up remains limited and awareness is the main barrier. She also underlined the role of supply chain engagement, with Nationwide embedding sustainability principles into its supplier code of practice and encouraging partners to set their own science-based targets.
Perhaps most importantly, Nationwide links climate performance to executive remuneration, ensuring internal focus and accountability. Amy’s advice to peers was to be transparent about levels of control, to use “basis of reporting” documents to explain methodology, and to avoid overstating progress where reductions are due to data changes rather than genuine decarbonisation.
Closing thought
The 2025 rankings show a sector in transition. The majority of lenders now disclose on climate, and the leaders are embedding climate into governance, risk management, and customer engagement. But progress is uneven, and real decarbonisation remains elusive. With IFRS S2 and CP10/25 just around the corner, the choice is clear: act now to build credibility, resilience, and customer trust, or risk being caught unprepared when disclosure becomes mandatory and transition risk crystallises.
Download the full industry analysis and ranking in our report.
