EconomyWhat are financed emissions and what is the role...

What are financed emissions and what is the role of banks to reduce them?

(Expansion) – The Alliance for Carbon Accounting in the Financial Industry (PCAF) aims to establish a methodology to measure and disclose greenhouse gas (GHG) emissions associated with investment and/or or loans from financial institutions, so that there can be an alignment to the Paris agreements and/or to a science-based target (SBTI).

The PCAF standard seeks that Scope 3 inventory data is complete, consistent, relevant, adequate and transparent.

Additionally, it seeks to promote greater transparency of the emissions that have been financed, therefore, that such emissions be measured and reported. Also, PCAF promotes improving the quality of the data source. Finally, it is intended that at the time of reporting the information be comparable and clear so that the contribution to what is established in the climate goals is visible. Inventory issues are made both at the sector level and at the type of asset (learn more about the methodology).

Currently, 293 institutions have committed to measuring and disclosing the emissions generated within their portfolios. However, only 85 have published information about their emissions; To the date .

Despite being a good effort, the so-called think tank published an investigation concluding that none of the institutions that have committed fully comply with the principles established by the Alliance.

In the case of Latin America, we have 30 institutions that have committed, but only five of them have published their inventories of financed emissions. Below I present an analysis based on the documents shared with the Alliance, identifying those aspects that are missing in order to comply with the provisions of the methodology for measuring emissions inventories.

The first financial institution is FAMA Investimentos, whose report does not specify to which sector the issues have been financed. Also, the quality of the data source is not reported, it is not indicated which part of the portfolio is covered (that it is possible to know which emissions have been financed). However, it does disclose how its emissions are being offset in the three scopes through carbon credits from the .

Banco Popular is another of the institutions that published its inventory of financed issues. Its report does not give a clear qualification regarding the quality of the data source, nor does it disclose whether credit is only granted to the agricultural sector, but it does indicate that subsequent revisions will be made to improve the quality of the emissions report.

The next is Banco Bradesco, an institution that does not report the quality of the data source, it only takes into account loans to companies. It also indicates that more asset classes will be published in subsequent reports. Lastly, it does not show which part of the portfolio is covered.

In the XP investment bank report, I identified that there is no visibility of the quality of the data source by sector, it does not indicate which part of the portfolio is covered, nor do they show issues by type of asset (only by sector) and they do not there is clear information about the source of the data.

The last institution I reviewed was Itau Unibanco, which meets practically all the requirements expected by the PCAF. All that remains is to report the issues by asset class.

Therefore, I believe that together with the recommendations issued by the 2 Degree Investing Initiative investigation, the PCAF methodology should continue to be updated through a format that allows data to be compared for efficient use at the time of decision making. financial.

Despite the effort that several financial institutions claim to be making in relation to the reduction of GHG emissions, the results of the PCAF show that the race towards carbon neutrality is just beginning and there are no clear signs that banks are taking efficient actions to short term.

Editor’s note: Rodrigo Jiménez is Associate Researcher at ESG Latam. Follow him on . The opinions published in this column belong exclusively to the author.

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