Group 2

Climate Change Commitment: learnings and concrete steps from values-based banks

GABV

1 June 2022

By Adriana Kocornik-Mina, Metrics and Research Senior Manager, Global Alliance for Banking on Values

 

To accelerate the transition to a low carbon future, the Global Alliance for Banking on Values announced the Climate Change Commitment (3C) in 2019. The 3C initiative calls on signatories to measure and disclose greenhouse gas emissions in their loans and investments, and invites them to develop future action plans to shape a sustainable economy. Find out some learnings and concrete steps on how values-based banks can align their loans and investments with the Paris Agreement.

The Paris Climate Agreement adopted in 2015 recognised the financial sector as having an enabler role in the achievement of the most ambitious climate-related goals. The text set specific targets to be collectively achieved to limit global warming to well below 2°C, and preferably to 1.5°C, offsetting the equivalent carbon emissions produced by the same amount elsewhere. To achieve the Paris Agreement goals, deep decarbonisation in energy, urban environments, infrastructure, industrial and land-use systems will be required.

The Global Alliance for Banking on Values announced the Climate Change Commitment (also called the 3C initiative) in 2019 during its 10-year anniversary celebration in Vancouver. In the letter and in spirit the 3C has been transformative, mobilising signatories to “assess and disclose the climate impact of their portfolio of loans and investments within a period of three years, and ultimately to ensure that the climate impact of their loans and investments are in line with the Paris Agreement”.

3C signatories logos
3C signatories as of January 2022

Assessing and disclosing progress to date by the 3C signatories, all frontrunners in values-based banking, is a necessary step to align portfolios to well below a 2°C future. It is also necessary for accountability and to build additional momentum for a transition. Furthermore, the 3C is also an opportunity to provide a yardstick for other global efforts, one of the most representative being the Glasgow Financial Alliance for Net Zero (GFANZ).

There are two parts to the 3C:

  • The measurement and disclosure within a period of three years of the emissions financed by 3C signatories. Scope 3 category 15 emissions are the result of activities from assets not controlled by the reporting organization, but that the organization indirectly impacts in its value chain.
  • Aligning emissions from lending and investment with the Paris Agreement goals requires not only climate action plans and target setting at the portfolio level, but also importantly, developing supporting relationships with clients and advancing collaborations with governments and NGOs to shape a sustainable real economy.

The 3C and the PCAF Standard

For the first part, the 3C relies on the methodology developed by the Partnership for Carbon Accounting Financials (PCAF). This methodology, which is tailored to different asset classes,  was published in the Global GHG Accounting and Reporting Standard for the Financial Industry (the PCAF Standard), as an important early step to help financial institutions to align with the Paris Agreement.

With its 3C and in partnership with PCAF in The Netherlands, first, and then in North America, the GABV became the driving force to globalise the PCAF Standard, and the financial sector’s recognition of its critical role in enabling the transition. GABV’s members have been very active in the Core group developing the global standard and they continue to share their knowledge as early entrants with the broader global PCAF community.

When a GABV member joins the 3C it is automatically included in the PCAF list of signatories, which grants them capacity development and access to resources to enable them to assess their financed emissions. Separately, the GABV Secretariat supports its members to meet their Climate Change Commitment. These efforts are three-fold:

  1. Supporting the development of knowledge and capacity to adopt the PCAF Standard
  2. Conducting the analysis of portfolios and estimating financed emissions
  3. Encouraging other members to join the 3C

The GABV has designed a series of activities to meet these objectives. For example, the GABV’s Secretariat has (1) facilitated webinars for its members to share what they have done, (2) invited PCAF Secretariat experts to clarify methodology-related questions during implementation, and (3) encouraged GABV members to participate in PCAF regional implementation groups as these can offer access to relevant information on a broader set of financial institutions. The 3C signatories have also been invited to join the Metrics Community of Practice, a group of experts in impact, sustainability, and banking at GABV member banks responsible for implementing the PCAF Standard in their institutions.

Values-based banks as pioneers of net zero commitments

Already five 3C signatories – ABS Bank in Switzerland, Amalgamated Bank in the USA, Bank Australia in Australia, Triodos Bank in Europe (The Netherlands, Belgium, UK, Spain and Germany), and Vancity in Canada – have published highly ambitious net zero targets and many more are building on historically close client-relations to further resilience and sustainability in the real economy.

As of May 2022, more than half of 3C signatories have disclosed financed emissions for one or more portfolios, and another fourth is on track to publish a first disclosure by mid-June. In three years, all but a handful of CCC signatories have disclosed financed emissions of at least part of their portfolios, and five have gone further to set ambitious net-zero targets. Reflecting the initial geographic spread of climate action globally, early disclosures have largely come from European and North American signatories. The current wave of disclosure is mainly from 3C signatories in Asia Pacific and Latin America.

The relatively early experience of 3C signatories implementing the PCAF Standard has been examined in three case studies. Setting these institutions apart is a willingness to assess the GHG emissions footprint despite the scarcity of data and internal capacity. And although GHG emissions accounting is a journey that starts with imperfect outputs it has already informed the design of transformative products and services, from climate-proofing a home to building renewable energy projects. Proactive engagement of stakeholders in various markets, as well as senior leadership support, have established as undeniable the need and urgency of transparently accounting and managing financed GHG emissions.

Through their actions, 3C signatories advance a shared values-informed vision of an inclusive, resilient, and sustainable future. It is no surprise. After all, values do make the world go around for this group of leaders in sustainable finance.

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