Climate Performance Metrics:
Exploring Options for Banks
Lightning round presentation, UNEP FI GRT
Rosemary Bissett, National Australia Bank
www.unepfi.org
www.2degrees-investing.org
www.2degrees-investing.org
www.ghgprotocol.org
1
UNEP FI delivers technical work on carbon management
for portfolios via the Portfolio Carbon Initiative (PCI)
There are 2 objectives/views for portfolio carbon management and disclosure
INVESTMENT
ROADMAPS
The climate performance objective – what are the impacts of an FI on cc? (focus
of the Paris Agreement/transition to a low-carbon economy)
The carbon risk objective – what are the impacts of cc on an FI/exposure to
potential losses arising from transition away from traditional economy? (focus of
TCFD)
2° C
CLIMATE
GOALS
CARBON
BUDGET
www.unepfi.org
ECONOMIC
ROADMAPS
INVESTMENT
ROADMAPS
www.2degrees-investing.org
FINANCING
ROADMAPS
INVESTOR
PORTFOLIOS
www.ghgprotocol.org
2
Performance metrics currently in use by banks
Metric type
Assessment
criteria
www.unepfi.org
Financed
emissions
Sector-specific
energy and carbon
metrics
Green-brown metrics
Practicality
Meaningfulness
www.2degrees-investing.org
www.ghgprotocol.org
3
Financed emissions
What?
GHG emissions attributed to exposure to a GHG-emitting asset
Practicality
Depends on the desired level of accuracy. ´Bottom-up´ - highly
resource-intensive. ´High-level level top-down´ estimates lose
meaningfulness. Practical for project finance and corporate lending.
Meaningfulness
Is of less value for risk or performance assessments given:
• backward-looking nature
• amalgamation of regulated and unregulated emissions
• blindness to other key risk factors such as policy and technology
contexts, cost pass-through and adaptive capacity, and
performance factors such as corporate innovation and R&D
www.unepfi.org
www.2degrees-investing.org
www.ghgprotocol.org
4
Green-brown metrics
What?
Categorizing activities into ´climate problems´ and ‘solutions´
Examples (here: power sector)
Green
% renewables in power
generation portfolio
Brown
% fossil-fuel based generation
power generation portfolio
Practicality
High for certain sectors and transaction types: only monetary and
technological data needed. However, only possible in sectors
where taxonomies/industry codes exist.
Where have known use of proceeds – can segment some lending
at company level.
Meaningfulness
Depends on usage, notably on contextualization, need disclosure
of both ‘green’ and ‘brown’. More meaningful if forward-looking
www.unepfi.org
www.2degrees-investing.org
www.ghgprotocol.org
5
Common principles
General agreement emerging in a series of common principles:
•
Completeness: report financing of both “green” and “brown” activities
•
Context: include both climate problems and solutions for context.
•
Fair Share: When banking activities occur in syndicates, reporting should be
based on “relevant share” of the activity, for both:
– climate problems (full lifetime emissions of a coal plant shouldn’t be
attributed to a bank if they were only part of an underwriting syndicate)
– solutions (don’t claim $10 million of “green” if you 20% of a $10 million
syndicate)
Note: Disclosure of ‘climate friendliness of lending’ has strong regional context – debate on whether
timing too early for a global standard
Example: Australia, Netherlands, potentially others
www.unepfi.org
www.2degrees-investing.org
www.ghgprotocol.org
6