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Exploring metrics to measure the climate progress of banks

This publication is part of a series by the Portfolio Carbon Initiative (PCI). It aims to inform the ongoing debate about how public- and private-sector banks should assess and report on the climate progress of their portfolios. It builds on a multistakeholder process that, in 2013, began to standardize the accounting of Scope 3 “financed emissions” (see Annex A). During that process, some financial institutions questioned the meaningfulness and practicality of the financed emissions metric.
To respond to these concerns, PCI partner organizations agreed to perform a broader assessment of the various metrics available to help financial institutions report on their impacts on climate change and their contributions (both negative and positive) to the transition toward a low-carbon economy. This paper follows a 2015 sister publication for investors: Climate Strategies and Metrics: Exploring Options for Institutional Investors. Both these papers are based on a broad PCI review of the metrics that financial institutions are using to publicly report on climate progress.

Key points

The paper provides recommendations for choosing metrics:

  • To fully understand a bank’s contribution to the low-carbon transition, there needs to be more comprehensive reporting on activities related to climate problems in addition to climate solutions. Banks should not be reporting on their contribution to climate solutions without also reporting on their contribution to the climate problem.
  • Banks should consider the criteria of completeness, context, fair share, and transparency when evaluating and choosing metrics to assess climate progress.
  • GHG accounting approaches, including project emissions and financed emissions, are the most useful for asset classes when the use of proceeds is known. Financed emissions may also be useful to provide a high-level picture of a bank’s exposure to emissions.
  • A green or brown metric is recommended when a bank wants to understand both its significance of exposure to climate solutions and problems in relation to each other.
  • The current discussions on the climate progress of banking exhibit strong regionality. Therefore, the best selection of accounting and reporting metrics may vary regionally. Peer comparisons and stakeholder outreach can be important aspects for performance tracking.
  • Most importantly, in spite of evolving climate-friendliness assessment practices, banks should not wait to begin measuring and disclosing metrics on climate progress and tracking performance. Meaningful and practical metrics are currently available for numerous asset classes, and banks can improve their approach over time as more useful metrics become available.