Stay updated on Climate change for free.
Subscribe to our myFT Daily Digest email to receive the latest news on Climate change every morning.
For those unfamiliar, discussions about carbon accounting may seem like theological debates regarding the number of angels that can dance on the head of a pin. Intricate, internally consistent, and captivating – though of limited practical significance.
Take, for instance, the recent dispute in the realm of net zero finance. Should banks only disclose emissions connected to loans provided to clients? Or should they also consider pollution from funding they underwrite and sell?
According to the report “Banking on Climate Chaos” by pressure groups, nearly half of the financing given to the fossil fuel industry by the 60 largest banks between 2016 and 2021 was in the form of capital markets facilitation.
Environmentalists hope that if banks measure their indirect contribution to global warming and establish reduction targets, it will restrict capital access for carbon-intensive industries. They advocate for treating underwriting similar to direct loans.
Some banks believe they should account for a smaller proportion of a client’s emissions, possibly as low as 17 or 33 percent, when they are not the lenders themselves.
For banks, “Scope 3” emissions, which are associated with the activities of a company’s suppliers and clients, are a crucial concern. While banks emit minimal carbon themselves, they provide substantial financing to carbon-emitting companies.
It is essential for banks to establish Scope 3 targets. Debating the precise carbon weightings attributed to different activities is unproductive. Scope 3 carbon accounting is already a vague concept, with potential double or triple-counting of emissions along a value chain.
The primary purpose of measuring Scope 3 emissions for banks is to create a baseline for reduction targets. If the initial level is high, so be it. Consistency across time and the sector is of utmost importance. Banks should account for all emissions associated with their underwriting activities, ensuring clarity.
If you are a subscriber and would like to receive alerts when Lex articles are published, just click the “Add to myFT” button above the headline.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
