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Greenhouse Gas Accounting: Why it matters for banks

GABV

11 June 2021

By James Niven, Chief Operations and Programmes Officer at GABV


The Paris Agreement came into force in November 2016 following a landmark global climate meeting a year before. The agreement is a legally binding treaty signed by almost all the world’s countries, committing them to limit global warming to well below 2 degrees Celsius compared to pre-industrial levels.  It matters a great deal, because most observers would agree, it offers the best hope of avoiding catastrophic climate change.  

 

We can’t fix the climate without fixing finance 

Governments, civil society and businesses all have crucial roles to play to meet these goals. And banks matter more than most because they can finance the solutions to the climate emergency and stop financing the industries and businesses contributing to the climate change problem. 

To make sure they finance the good, avoid the bad, and do it in time, banks – and financial institutions more generally – need to understand what the footprint of their portfolios is, so they can set targets and start working with their clients to reduce them. They need this for themselves, and to show others how their financial decisions contribute, or not, to climate change. They also need to monitor progress over time. 

They need a credible, standardized, easy-to-use way to measure and report the carbon emissions of a financial institution’s loans and investments. That’s where the Partnership for Carbon Accounting Financials (PCAF) comes in. Because PCAF is a methodology that does exactly that. 

Developed by financial institutions themselves the methodology has become a global standard with close to 200 financial institutions with assets above USD 50 trillion using it – from small, values-based banks to some of the world’s largest financial institutions.   

How PCAF grew from a Dutch initiative to a global phenomenon

GABV banks played a crucial role in the PCAF story. In 2019, at the GABV’s 10th-anniversary meeting in Vancouver, 28 banks signed the GABV’s Climate Change Commitment, agreeing to assess and disclose their financed emissions within three years. This signalled that banks from very different parts of the world believed the PCAF methodology could be applied to their business. 

That, and the development of a North American Chapter led by GABV member Amalgamated Bank, was crucial as a catalyst for the launch of PCAF as an international programme. With the support of progressive funders like the Hewlett and IKEA Foundations, the PCAF global programme was born. Since then a secretariat, run by consultancy Guidehouse, has led to the rapid expansion of PCAF around the world. Among other things the programme:

  • Provides practical support for banks using the PCAF methodology, including one-to-one technical advice as well as workshops for banks in the same region to share best practice
  • Proactively works to expand the number of banks using PCAF
  • Established a database providing emission factors making it straightforward for institutions to get started with assessing and disclosing their financed emissions. 

GABV banks, and the GABV itself, are active participants in all these efforts. A member of the GABV secretariat sits on the global PCAF Steerco, together with representatives from NMB Bank (Nepal), Amalgamated Bank (US) and Triodos Bank (Europe). 

The PCAF programme has targeted at least 250 financial institutions to have adopted the PCAF methodology by the end of 2022. But ultimately we believe all institutions should assess and disclose their emissions so that they can take informed steps, and monitor their progress, on the journey to a low carbon future. 

PCAF is a powerful example of how values-based banks can collaborate to play an important role in translating a values-driven agenda into positive, systemic change. And it could hardly be more urgent, because this is the decade when real change needs to happen. 

About the Partnership for Carbon Accounting Financials

The Partnership for Carbon Accounting Financials (PCAF) was launched globally in 2019. PCAF institutions work together to jointly develop the Global GSG Accounting Standard for the financial industry to measure and disclose the greenhouse emissions of their loans and investments. By doing so, PCAF institutions take the first step required to assess climate-related risks, set targets in line with Paris Climate Agreement and develop effective strategies to decarbonize our society. 

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