Measuring carbon footprints

A new method is available to measure the carbon footprint of investments. It allows financial institutions to implement their strategy aimed at a low-carbon economy.

Sustainable Finance Platform: new standards allow financial institutions to measure carbon footprint

Increasingly, financial institutions are looking to gain insight into the climate-related consequences of their portfolios. Current figures on the carbon footprints of their investments and loans allows them to:

  • establish and disclose the carbon footprint of each investment or loan; and
  • set new targets and modify their portfolios to contribute to a low-carbon economy.

Transition

“More than anything, the increasing urgency of keeping global warming below 1.5 degrees has become apparent over the past year,” says Piet Sprengers, Chair of the Platform Carbon Accounting Financials (PCAF). “The financial sector is indispensable in the required transition to a low-carbon society over the next decade. The members of our platform are well aware of this, which is why they work together to devise effective methods for goal-setting, impact measurement and steering towards the desired results.”

Standard for measuring carbon footprint

Until recently, no standard was available for financial institutions to measure their carbon footprint. In 2017, however, the Platform Carbon Accounting Financials (PCAF) developed a new harmonised methodology, facilitating the measurement of carbon footprints of six asset classes: government bonds, listed equity, project finance, mortgages, commercial real estate and corporate debt. It allows financial institutions to work towards portfolios that have a low carbon impact, thereby contributing to meeting the Paris Climate Agreement goals.

Carbon footprint of assets under management

The PCAF's members use the methodology to establish the carbon footprint of the assets they manage. Meanwhile, they have done so for almost half of their assets, worth over EUR 1 trillion. They documented their findings in their second report, and presented it to the Standing Committee for Economic Affairs and Climate Policy of the Dutch House of Representatives.

Emissions of a fictional mortgage portfolio

Working jointly on improvement

PCAF calls on financial institutions to adopt this methodology, and invites other parties to work jointly on further improvement and refinement. Best practices can be exchanged, dilemmas discussed and workloads shared. PCAF also promotes the methodology it developed internationally.

The working group

PCAF was set up in 2015, and it is affiliated with the Sustainable Finance Platform. PCAF's participants include: ABN AMRO, Achmea, Actiam, ASN, MN, PME, PMT, Triodos, De Volksbank and FMO. It is chaired by Piet Sprengers (ASN Bank), and commissioned by Arie Koornneef (ASN Bank).

For further information about the working group please visit www.carbonaccountingfinancials.com.

More information

Read more about the Sustainable Finance Platform.