For financial institutions, scope one and two greenhouse gas (GHG) emissions centring on energy use in their offices are quite easy to calibrate. However, sitting fair and square in the Greenhouse Gas Protocol’s list of Scope 3 emissions is a potent word: investments.
In August 2020, the 70-strong industry-led Partnership for Carbon Accounting Financials (PCAF) published a draft report. Entitled “The Global Carbon Accounting Standard for the Financial Industry”, it pointed out the need for harmonized methodologies and reporting rules to step up the identification and disclosure of portfolio GHG emissions within the finance sector. The move to measure financed emissions can be seen as part of other global initiatives to ensure the finance sector develops the concepts of green and sustainable finance, and meets its obligations to contribute to the achievement of the Paris Climate Agreement.
This issue explains why banks, investors and insurers should take more pro-active steps towards assessing their financed emissions and highlights the various measuring approaches recommended by the PCAF.