Measuring climate impact: how do banks do that?

Today is the fourth Thursday of October, National Climate Day in the Netherlands. Not just the day on which the Dutch cabinet reflects on climate policy. But also the day of the publication of ‘Climate Impact Measurement’, which contains examples of methods to measure and report on the climate impact of bank portfolios. Of interest to fellow banks and other financial institutions. But actually for everyone who wants to know how banks work on this important theme.

Nederlands

To avert dangerous climate change, nearly 200 participating countries reached a climate agreement in Paris in December 2015. The aim of this agreement it to limit global warming to well-below 2°C compared to the pre-industrial era and to strive to limit this to a maximum of 1.5°C. The actions that result from this are not limited to governments only; everyone must contribute. Banks are also working on climate action: in the summer of 2019, the financial sector committed itself to the climate goals of the government by signing the climate commitment. Financial institutions agreed, among other things, to report on the climate impact of their loans and investments from the financial year 2020 onwards in the Netherlands and abroad.

Measuring is knowing

How do banks do this in practice? Climate Impact Measurement shows how banks can make a proactive and constructive contribution to combating climate change. The document describes two measurement and reporting methods that are already actively used by banks in the Netherlands, namely PCAF and PACTA. These methods are also placed in an international context. With PCAF, a bank can determine and show the CO2 emissions of loans and investments. PACTA has been developed to enable benchmarking including target-setting for aligning portfolios with the goals of the Paris Agreement, translated into CO2 intensity. In this way, banks provide insight into their climate impact and what steps they must take in order to reduce their climate impact in line with the goals set in the Paris Agreement.

Sharing knowledge

No measurement and reporting method is ideal or even sufficient. It is therefore important that banks make a joint effort to improve the existing methods and possibly develop new methods. The more organisations become acquainted with each other’s methods and actively share best practices, the sooner we can arrive at an effective approach. This report is intended as a first step to share knowledge with each other and to engage in a dialogue with each other. On behalf of the banks, the Dutch Banking Association (NVB), is happy to engage in a dialogue to actively contribute to further development and the exchange of knowledge. To this end, the publication Climate Impact Measurement is evaluated annually, whereby it is examined whether there are any new developments that need to be taken into account.