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Greenhouse gas emissions associated with financial institutions’ inventions, lending and underwriting activities are on average 700 times higher than their direct emissions, according to environmental non-profit CDP.
In its ‘The Time to Green Finance’ report, the organization found nearly all climate-related impacts and risks of global financial institutions originate from financing the wider economy.
Among the 84 institutions highlighted in the report were AXA Group, BNP Paribas, BNY Mellon, HSBC Holdings plc, Legal and General and Nomura Holdings.
In 2020, only 25% of the financial institutions that disclosed their results through CDP’s first financial services climate change questionnaire reported portfolio emissions.
Emily Kreps, global director of capital markets at CDP, said: “The financial services sector is critical to achieving a net zero carbon future. The real economy transition will require a massive amount of capital directed at decarbonizing the economy and enhancing resilience, which only the finance sector can facilitate and provide.
“As regulators move towards mandatory disclosure – CDP, with its 20+ years of providing comparable and TCFD-aligned environmental disclosure data to the capital markets, is ideally positioned to assess the global finance sector’s readiness to respond.”
She added: “For financial institutions that do not currently measure their financed emissions the message from this flagship report is clear – they must start doing so, now, to understand their overall climate-impact and the risks they face.
“We urge all financial institutions to commit to de-carbonize their portfolios by setting science-based emissions reduction targets, aligning all activity with the Paris Agreement and disclosing the impact of their financing activities.”
