51% of Dutch financial institutions have plans to reduce carbon emissions | New


Just over half of the 50 financial institutions in the Netherlands that have signed the country’s 2019 Climate Commitment pledging to align with the goals of the Paris Agreement have issued a CO2 reduction plan.

The plans are difficult to compare, however, as they are often partly based on estimates. Signatories, including 13 pension funds, also use different methods to measure carbon emissions.

Almost all signatories now measure the carbon footprint of their own investments and loans, according to a KPMG progress report, but only about half have a concrete plan on how to reduce emissions.

By next year, the remaining 49% will also have to publish their own reduction plans, according to the 2019 Climate Commitment.

Measuring carbon emissions is not a simple exercise, stressed KPMG. Indeed, data on issues of government bonds, small companies and unlisted assets are often not available or out of date.

“This makes it difficult to obtain comparable results suitable for decision-making and governance,” according to the accounting firm.

Another complication is that financial institutions disagree on the best method to measure carbon emissions. Some prefer to measure carbon intensity on the basis of total production, while others report CO2 emissions as a percentage of income or money invested.

PCAF or PACTE

Most financial institutions measure their carbon footprint using the so-called PCAF (Partnership for Carbon Accounting Financials) method.

This method, originally developed by Dutch banks in 2015, has become a global standard used by nine of the ten signatories of the Dutch Climate Commitment. However, using the same method does not guarantee comparable results as the CFP guidelines are not very strict.

The CFP connects the CO2 emissions on assets under management: as a result, increases in asset prices lead to a decrease in CO emissions2-intensity, even if the absolute levels of carbon emissions have not fallen.

The PACT (Paris Agreement Capital Transition Assessment) alternative is linked to the Paris Agreement. It examines carbon emissions per unit of product, with special attention to seven carbon-intensive sectors such as fossil fuels, steel and the cement industry.

Estimates

Since not all companies provide the necessary data, vendors who collect emissions data, such as Sustainalytics and MSCI, often need to use complementary metrics such as industry averages.

It is therefore difficult to determine whether companies are making real progress in reducing their emissions. Investors who aim to reduce the actual emissions of their portfolios also face the problem of stale data: the available CO2-the data are on average two years old.

The results of emission reduction measures therefore tend to become visible only with a certain delay.

For the original article, go to Pensioen Pro.


Marianne R. Winn