Continuing our journey to becoming a climate positive bank
Making a positive impact on the world
We’ve pledged to become climate positive by 2035, taking more carbon out of the atmosphere through our lending and investment choices than we are responsible for emitting.
This is a bold and ambitious objective which requires a decade of commitment to achieve, but the first and most important step is to measure and understand our impact. This is something we have done for the past three years with our operational carbon emissions (the emissions associated with the running of our business) and you can read our previous carbon report here.
However, our operational emissions are only part of our carbon story. More recently we’ve started to measure the financed emissions associated with our lending and are disclosing these for the first time in this report.
As a lender, we’re responsible for reporting on the proportion of the emissions resulting from the homes and businesses that we finance. The worldwide move to increase transparency in the financing of fossil fuel use and associated emissions includes requirements for banks to publish and explain the quantity of emissions that they are financing through their lending. Meeting this reporting requirement is a big task on its own, and an area within which the quality of information is continuing to evolve, but we’ve always set outsides ambitious targets. That’s why our pledge not just to measure but also to act and become climate positive includes our financed emissions.
This report details the steps we’ve taken to measure all of our carbon emissions and our plans for improvement going forward. Once we have the data then we can begin to act, and future reports will provide more detail on the steps we are taking to hit our objective.
Working towards climate positive: our strategy
Atom runs a low impact, direct and sustainable business model. We’re app-only and branchless, operate a four-day week whilst maintaining a hybrid working policy.
Our HQ is in an award-winning green building surrounded by a woodland managed for biodiversity.
However, we want to do more to actively improve our impact on the environment, especially as we grow as a business. This is a challenge for every business but we believe that our operating model means that we have the potential to become a leader in our sector.
Our actions continue to be shaped by our ‘measure, reduce, substitute, invest’ strategy.
Measure
Detailed measurement of all of the carbon emissions that we are responsible for, including those that we finance through our lending.
Reduce
Identify and implement efficiency measures to reduce the total CO2e that we are responsible for emitting as a business.
Substitute
Where we cannot reduce our impact further, adopt new technologies, suppliers or policies to lower emissions.
Invest
Channel investment into projects that lock in carbon from the atmosphere, both through our lending and our direct involvement in natural capital projects, low/zero carbon energy projects and innovations that drive the transition to net zero.
We apply this strategic cycle annually and reinforce our decisions with choices for the future.
Continuing our climate positive journey — what do we measure?
Like last year, our carbon report is aligned to the dates of our annual report, covering the financial year, April 2023 to the end of March 2024.
For the past three years, in collaboration with Alectro — an emissions insight specialist — we’ve collected and analysed data to enable us to measure our operational carbon emissions.
The methodology used for the analysis is consistent with the GHG Protocol Corporate Reporting and Accounting Standard, the world’s most commonly used framework for measuring greenhouse gas emissions. The framework divides carbon emissions into the following ‘scopes’.
Scope 1
Emissions generated from sources Atom own or have control over.
Scope 2
Emissions created indirectly from the energy purchased by Atom.
Scope 3
Emissions resulting indirectly from wider business activity and Atom’s supply chain.
Scope 3 emissions are broken up into fifteen categories relating to different activities.
After an assessment of our business model, the following categories were identified as relevant to Atom this year:
Category 1
Purchased goods and services
Category 3
Fuel and energy-related activities not included in scope 1 and 2
Category 5
Waste generated in operations
Category 6
Business travel
Category 7
Employee commuting
Category 9
Downstream transportation and distribution
Category 15
Investments
Category 15 (Investments) is where we measure our financed emissions and is a new part of this report for 2024.
Over the past year, we have worked with a number of specialist third parties to build up a picture and establish some initial baselines for our financed emissions.
This is an emerging part of banks’ reporting duties and we have followed the Partnership for Carbon Accounting Financials (PCAF) Global GHG Accounting and Reporting Standard — the most widely recognised accounting framework for financed emissions — to calculate the emissions that we are responsible for.
Atom currently has four balance sheet loan portfolios that are responsible for generating emissions of fossil carbon. The emissions result from our lending to home and business owners who in turn heat their homes, power their firms and cool their premises using fossil carbon as the source of fuel for these activities.
Adopting this accounting standard helps us to remain transparent in our methodology and allows us to benchmark our emissions with our peers. We are aware that the methodology is under constant review and in particular that it is not finely tuned to UK markets, especially for smaller and medium sized businesses. This is an important consideration for policy making for the bank and we will remain close to the changes that are coming to carbon accounting standards.
Our carbon report results
Operational emissions
Below, you’ll find the results of our carbon report.
Before we dive into the findings, there are a couple of key considerations to make:
- We use the latest emissions factors published by our suppliers, therefore these can lead to slight year on year variations in carbon emissions figures.
- The majority of data inputs come from verifiable sources; in the few cases where this is not possible, the inputs are estimated using industry best practices.
- We use tCO2e as a metric for measurement of emissions which stands for tonnes (t) of carbon dioxide (CO2) equivalent (e) - the standard measuring unit for greenhouse gases.
The headlines
This year Alectro introduced a rating system to help companies transparently disclose their sustainability efforts and achievements.
Each company that engages with the rating system agrees to publish an in-depth breakdown of their operational carbon emissions. The Alectro badge provides a link to a page detailing Atom’s emissions.
On a scale of A+ (highest) to D (lowest), we received an ‘A’ rating, expressing our progress in measuring and reducing our operational carbon emissions over the past year. The rating is composed of an assessment of our actions across six categories, notably: Measure, Engage, Reduce, Supply Chain, Act and Consistency. More information about the methodology can be found here: alectro.io | Elegant and verifiable emissions insight for positive businesses . An ‘A’ rating puts us in the 82nd percentile of the firms that Alectro has assessed against these criteria.
Our total impact was
658.44 tCO₂e
This is a reduction from 673.06tCO2e in the 2023 financial year and equates to a value of 1.31 tCO2e per employee (based on the average of 504 full-time employees in 2023-2024), down from 1.49tCO2e per employee in 2022/23.
The breakdown of these emissions across the major activity areas of the bank is as follows:
Major individual areas of emissions were:
Employee commute
29.37%
Cloud computing
21.87%
Purchased goods
18.16%
Business travel
12.24%
Other factors
18.36%
Our results in detail
Let’s break down the results of our carbon report a bit further and look at some of the categories in more detail.
Facilities
89.24 tCO₂e
As expected, taking into account the hybrid working culture at Atom, the largest impact from the facilities category was the 66.23tCO2e generated by our employees working from home.
With regards to Atom’s office spaces, heating and transmission and distribution were the key sources of emissions.
Given the small footprint of our London office, our office-use emissions mainly come from our head office at The Rivergreen Centre in Durham . Here, we use a biomass boiler to heat the building, which is supplemented by an LPG backup system. The Rivergreen Centre was built in 2005 and is a highly innovative office space, which has received a BREEAM rating of “Excellent”.
Towards the end of this financial year, we reduced our occupational footprint at Rivergreen in accordance with office demand. Whilst the impact has not been fully realised yet, the expectation is that this will help to decrease the emissions from our facilities going forward. On top of this, we still use 100% renewable tariffs in our offices, ensuring that our Scope 2 emissions remain at zero.
Operations
295.18 tCO₂e
Our emissions from operations saw a large reduction compared to FY23, decreasing from 370.03tCO2e to 295.18tCO2e. This was driven by reductions in emissions from both purchased goods and cloud computing.
Purchased goods
This year saw a decrease in emissions from purchased goods as a result of more conscious purchasing decisions in favour of low or zero suppliers and products. The largest contributor to the purchased goods category is electronic equipment. Despite an increase of 52 full time employees over the year, our emissions from purchased goods decreased by 58.76tCO2e. The embodied carbon in monitors and laptops remains the main contributor to these emissions. Where possible, we are working with our procurement team to align more of our supply chain to sustainable providers.
Cloud computing
Atom bank continues to use Google’s cloud infrastructure for its cloud computing needs. As they are one of the global leaders in sustainability, the operating emissions were completely offset by them. The production of the physical infrastructure used in Google’s cloud does utilise fossil carbon and consequently we measure the embedded carbon in the kit that we rely on.
Optimising for cost and efficiency led to a reduction of 21.87tCO2e compared to the previous year.
Transport
274.02 tCO₂e
The commute and other business-related travel remained the largest contributor to Atom’s operational carbon emissions. Driven by the increase in headcount over the financial year, commuting emissions increased by 5.58tCO2e.
However, building upon a trend seen in last year’s data, the average carbon intensity of each km of the team’s commute decreased from 0.14kgCO2e/km to 0.126kgCO2e/km. This shows Atom’s employees are favouring transport methods that generate lower carbon emissions over time. Notably, the percentage of kilometres travelled using low-or no-carbon (e.g. EV's, public transport, walking or cycling) methods of transport increased to 35% from 23%. In part this was due to the success of Atom’s salary sacrifice scheme for electric vehicles , which was launched in 2023 and which has been taken up by 22 employees to date.
The team’s commute patterns are broken down by mode of transport in the chart below:
Our supply chain
Working with Alectro, we have continued to review the commitments to record, report and reduce environmental impact across our supply chain.
Investing in our future
We have now completed a full assessment of our operational carbon emissions for the last three years, and a partial assessment of emissions for the year before that.
We feel confident that we understand and have accurate measurements of the main drivers of our scope 1, scope 2 and scope 3 emissions excluding scope 3.15, our financed emissions, which are very different in nature and are detailed in the following section.
Our operational emissions are reducing on a per full time employee (FTE) basis year on year as we drive efficiencies within the business, while adopting new technologies and suppliers in our journey towards a net zero future.
However, our model also recognises that at this stage we cannot completely eliminate our reliance on fossil fuels, particularly within our travel and purchased goods categories. Whilst continuing to drive out more efficiencies and striving for better outcomes and lower emissions, in line with our strategy of measuring, reducing, substituting and only then investing, we feel it is time to start to mitigate the operational emissions that we have been responsible for.
Atom is now 10 years old, and based on our peak annual emissions we estimate that the firm has been responsible for between 6,000 and 7,000 tonnes of CO2e entering the atmosphere since the business was founded. In response to this, and as a first step on a pathway that will necessarily involve a wide range of choices in the future, earlier this year we purchased 25 acres of newly planted woodland in Northumberland. The land was formerly an open cast coalmine and has been planted with a range of native broadleaved trees that will sequester close to 7,000 tCO2e as the woodland matures.
Planting woodland is a key part of using the biosphere to trap carbon over the coming decades and centuries. We know it is not a perfect answer to what is needed in the future, but it is a recognition of what we are responsible for to date, an addition to the conservation landscape in our region and a first step for our own investment strategy.
The woodland sits on our balance sheet, is paid for by us and is managed to deliver the outcomes we seek. We are not outsourcing our responsibility to create a climate positive bank, and we hope to lead through example by using the banking model in this way.
Watch the video to learn more about our woodland, why we made the investment and what it means for our strategy going forward. See the video here:
Atom bank Buys Northumberland Woodland
Financed emissions
Context
Like other financial institutions, our lending activities produce far more emissions than our own operations. This is inevitable for a bank like Atom. Our business model relies on supplying finance to tens of thousands of households and small businesses, and until the wider economy is decarbonised, these firms and households will continue to use fossil fuels to heat their premises and power their lives. For some banks this might be a reason to shrug off the challenge of reducing the emissions associated with lending. However while there will inevitably be some parts of the economy that are slower to decarbonise or customers who cannot or do not choose to opt for low or zero carbon solutions as quickly as others, there is a great deal that lenders can do to improve awareness, provide options for customers and change policies and even pricing and products that promote the transition to zero carbon. But none of this is possible without good quality data and an awareness of what we do understand and where we are still making estimations.
Methodology and limitations
We have put significant effort into measuring and understanding our financed emissions over the last year. Not only is this measurement crucial to quantifying progress against our climate positive commitment, it also allows us to make informed decisions on the best ways to support our lending customers in making their own transition and deciding where to allocate our capital in the future.
However within the industry and across many sectors, it is broadly accepted that there are significant limitations impacting financed emissions calculations. One of the most prominent being the lack of reported carbon emissions and actual energy usage data available. Recognising these limitations, the Partnership for Carbon Accounting Financials (PCAF) produces a data quality scoring system to reflect the continued use of estimation in carbon reporting, and to help everyone understand the journey ahead to capture the highest quality data.
These data quality scores range from 1 (most accurate) to 5 (least accurate). For Atom the most important measures of financed emissions stem from the emissions associated with power, heating and cooling associated with the buildings that are secured against our residential and commercial mortgage books, and a fuller understanding of the emissions from all activities undertaken by the SMEs that are funded through our partnership with Funding Circle.
Metered data on energy use - read or downloaded from individual properties - is required to achieve data quality scores of 1 or 2. These measurements are not routinely available in the UK and this is a significant limitation to the overall data accuracy that we and other banks can operate at. From score 3 to 5 a varying degree of approximation is involved, with score 3 involving some assessment (e.g. from an EPC certificate) and score 5 involving only an estimate of energy intensity and carbon emissions moderated for some data on size of firm or size of building.
Alongside issues of data quality, many firms only measure and disclose their most material categories of lending — typically to their large corporate clients or from an aggregated picture of their portfolios. Atom has decided to disclose the financed emissions associated with all of the assets on our balance sheet. Encouraging transparency is key in the journey to net zero and we hope that, by leading the way, our results can help others benchmark their own financed emissions.
Collecting accurate data to inform decision making
To ensure that our calculations are as accurate as possible, we have engaged with multiple partners specialising in the calculation of financed emissions. This collaboration has strengthened our confidence in our numbers. It has also given us a chance to explore different methods for estimating energy use when we don’t have the exact data available.
We have also collaborated with partners involved in the origination process — in particular Landbay for Buy to Let mortgages and Funding Circle for unsecured lending to small and medium sized businesses. This ensures that the calculations are consistent with their understanding of the assets that they originate.*
Edward Twiddy, Director of ESG at Atom said:
“Despite involving multiple partners and considering the data from several perspectives, we are conscious that we will not have the correct answers for any of the asset classes on our balance sheet. We are not making this a reason for dismissing the data or for inaction - over the next decade Atom has a role in the transition to net zero and beyond, and that task involves many hundreds of thousands of tonnes of carbon being removed from our balance sheet. We are committed to working with the banking sector and the property sector to increase understanding, transparency and action on both data quality, as well as the reduction of emissions.
“Recognising that there is a long way to go on some of the data sets and that we are ingesting inaccuracies into our models, we nonetheless have decided to adopt the data on financed emissions as our baselines and to start the journey to climate positive by 2035.”
The results
Residential and commercial mortgages
We do not offer 100% finance for any mortgage. We limit our residential lending to a maximum of 95% of the property value and our commercial mortgages are typically below 75% of the property value, often much less.
This means we only include the emissions for the portion of the property we finance. As the homeowner pays off their mortgage, they become responsible for more of the property’s emissions.** Additionally, for the purposes of these calculations the value of the property is fixed at the time the loan was originated. This provision prevents the bank from profiting from a reduction in carbon emissions as a result of rising property values.
The Scope 1 and 2 emissions (those associated with power, heat, coolant etc) generated through energy consumption are attributed to us, the lender, on the basis of the outstanding loan vs the original value of the property at the time that the mortgage was provided. Given that we are unable to access metered energy use information, our calculations for our residential mortgage portfolios correspond very closely to a data quality score of 3. This is consistent with the disclosures of other mortgage lenders and provides a foundation for improvement in future years.
For our commercial mortgages, the score is closer to 3.1. There are fewer data points available for these properties, we know less about what is happening in individual buildings because one small business is very different to another, and consequently the data quality score is lower.
There is a lot of valuable work to be done to increase the quality of information and disclosure of emissions from SME loan books and we will be active in this process with partners such as B4NZ and the British Business Bank as well as with our peer group of other engaged lenders.
Unsecured business loans
For unsecured loans, emissions are attributed according to the ratio of the outstanding loan amount to financing requirements of the SME. Due to even more limited data quality, and the very limited availability of reported emissions data, an economic activity-based approach was selected as the most appropriate method to begin to measure the emissions from this part of our balance sheet. The calculations involved sector specific emissions factors corresponding to the amount of carbon emissions emitted per unit of revenue. Using sector specific emissions factors leads to a number of known inaccuracies and therefore the numbers disclosed in this section should be treated with some added caution.
Nonetheless, the emissions factors were taken from the PCAF database and follow one of their approved methodologies.
The measurements of our unsecured lending portfolio achieved an average PCAF data quality score of 4.0. This is a start but this level of estimation - and the uncertainty that this brings to making pricing or policy decisions about how to reduce emissions - is not acceptable in the medium term. We will continue to investigate the measures we can take to improve data quality and then take steps to reduce the carbon intensity of this lending.
It is important to note that the carbon emissions resulting from unsecured lending are noticeably higher than those from secured lending. This is because unsecured loans can be used to finance any aspect of a business. The calculations reflect this by accounting for scope 1, 2 and 3 emissions rather than restricting emissions to those associated with a particular property (scopes 1 and 2).
The full data set
Our financed emissions across our loan portfolios are shown in the table below. In line with the PCAF methodology, these are calculated for on balance sheet loans.
| Metric | Atom Residential Mortgages | Atom Commercial Mortgages | Landbay Originated Buy to Let | Funding Circle Originated Unsecured Lending |
|---|---|---|---|---|
Metric Financed emissions (tCO2e) | Atom Residential Mortgages 32,213 | Atom Commercial Mortgages 28,936 | Landbay Originated Buy to Let 3,527 | Funding Circle Originated Unsecured Lending 185,808 |
Metric Economic emissions intensity (tCO2e/£m of lending) | Atom Residential Mortgages 14.2 | Atom Commercial Mortgages 52.2 | Landbay Originated Buy to Let 9.6 | Funding Circle Originated Unsecured Lending 537.2 |
Metric PCAF data quality score | Atom Residential Mortgages 3.03 | Atom Commercial Mortgages 3.11 | Landbay Originated Buy to Let 2.93 | Funding Circle Originated Unsecured Lending 4.00 |
We are engaged with our peers to better understand how to interpret these figures. Whilst PCAF provides a widely used methodology, variations in the metrics reported mean that it is difficult to accurately benchmark our emissions against the wider industry. This limits the judgements that we are able to make on our first set of figures. To ensure progress is made, we will pursue industry conversations to establish best practice alongside continuing to be clear and transparent with our strategy.
To read more about what this means for our strategy, please refer to our blog by Edward Twiddy, Director of ESG.
Next Steps
There is a lot to do and we have set ourselves an ambitious and stretching target to be climate positive by 2035. So what will we be doing next?
Annual reporting — we’ll continue to track our carbon impact across the business, and report the results in line with the latest requirements and guidance.
We will increase the frequency of analysis and measurement of our financed emissions to at least twice per year and set targets that feed into the whole team’s rewards based on a constant reduction in the carbon intensity of our lending, whilst maintaining our commercial returns.
Continue to make sustainable purchasing and supplier decisions, requiring suppliers to prove that they have a low environmental impact. Currently, only 46% of our supply chain have analysed their carbon footprint.
Support colleagues to help reach the business and individual goals regarding sustainability. We’ll continue to develop our capacity to help our employees in their own journeys to net zero through the transition to EVs and to public transport.
Continuation of the four day working week and hybrid working policy whilst maintaining clear productivity goals and coaching support for everyone.
Making further changes to risk and credit policies to drive more lending with lower emissions onto the balance sheet.
Finding and making further investments in natural capital that generate verifiable carbon credits.
Work with partners and peers to increase the quality of data and be open and transparent with everyone where we think data is not strong enough for sound or reasonable decision making; bad data opens up banking to criticism for either going too far or not far enough and we should not live with that risk.
*We have also set baseline dates for annual measurement of each asset class. This involves the calculation of financed emissions alongside an assessment of climate related risks (physical risks like flooding and transition risks as markets and regulations evolve). The residential mortgage book will be assessed annually at the end of the first half of our financial year (end September), and the loans to small and medium sized businesses will be assessed annually as at the end of the third quarter of our financial year (end December). From FY25 we will also increase the frequency of measurement to at least a half yearly basis from this annual assessment.
**This is called the ‘attribution factor’ and simply reflects the proportion of customer emissions that a lender is responsible for. This is calculated on the outstanding value of the loan in relation to the value of the asset - the so-called loan-to-value (LtV) ratio. The value of the property is fixed at the time the loan was originated, but the outstanding amount is recalculated at the time of assessment.