HBOS HAS pledged to make itself carbon neutral by the end of 2007, becoming the first major Scottish company to take such a stance.

The bank will offset its remaining UK emissions through buying carbon credits. However, the target does not take into account its small international operations in Ireland and the United States.

Since 2004, HBoS has reduced CO2 emissions by 65%, from 163,000 tonnes to 57,000 tonnes last year, the equivalent to the emissions generated by 17,500 homes in a year.

This has been achieved through green electricity contracts and other energy savings measures in its network of UK offices and branches.

The remaining 57,000 tonnes, some of which is produced by business travel, will now be eliminated in the shorter term by buying Kyoto-regulated carbon credits.

The bank is also introducing a Green Miles scheme that encourages staff not to take business trips and will aim to cut the growth of its travel miles in half (5.5 million miles) within the next 12 months.

It also plans to launch a green mortgage in the second half of 2008, although it has yet to provide any details. The Co-operative Bank pioneered the concept of green mortgages seven years ago. For every mortgage on its books, it makes a donation to a climate-change combating organisation. In addition, customers receive a free home energy report which provides advice on how to make their home more energy-efficient.

Duncan McLaren, chief executive of Friends of the Earth Scotland, welcomed HBoS's initiative. However, he said that the banking industry must also address the carbon footprint of the projects it finances.

An HBoS spokesman argued that it follows the sector's ethical and environmental "Equator Principles". But McLaren said: "Those principles do not stop banks from choosing to invest in oil pipelines, gas terminals, car manufacturing plants or any other investments that commit society to future carbon emissions."