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November 01, 2012
US Banks Persist in Financing Climate Change
    by Robert Kropp

A report from BankTrack and the Rainforest Action Network urges financial institutions to measure and report on financed emissions, and recommends that they support expanded disclosure requirements being developed by the Greenhouse Gas Protocol.

In its assessment of the environmental performance of the US financial industry, this year's Newsweek Green Rankings found evidence of "notable improvements in managing its direct environmental footprint through energy-efficiency initiatives and reductions in waste and water consumption."

However, the Rankings continued, "Their relationships with companies engaged in environmentally sensitive activities overshadow commitments to mitigate climate change."

The degree to which such relationships persist has been described in numerous reports from
BankTrack, one of which bluntly stated, "While banks are employing a lot of 'climate speak', this is more or less a smoke screen to continue their financing of the coal industry."

A newly published
report, from BankTrack and the Rainforest Action Network (RAN), warns, "The financial sector must act quickly to shift financing from fossil fuels to renewable energy: By 2017, newly-built and existing power and industrial infrastructure will lock-in enough future emissions to blow through the remaining global carbon budget and exceed the Intergovernmental Panel on Climate Change's 450 parts per million (ppm) atmospheric CO2 stabilization target, above which severe climate change is likely to take place."

Despite the reputational and financial risks to banks of financed emissions, few of them measure the greenhouse gas (GHG) emissions of their portfolios. Yet the
Greenhouse Gas (GHG) Protocol, in a supplement to its Value Chain (Scope 3) Accounting and Reporting Standard, is developing guidance to help banks account for emissions from lending and investments.

Technical guidance from the Protocol advises banks to measure their Scope 3 emissions by basing them on "the proportion of the company's combined debt and equity financed by the bank through a loan, investment, or other transaction," according to the BankTrack and RAN report. The report recommends that financial institutions actively support the expanded disclosure requirements being contemplated by the GHG Protocol, and commit to emissions reduction in their portfolios as well.

Noting that major US banks have thus far provided over $100 billion to green financing initiatives, the report points out that banks have neither measured nor reported on the impacts of such investments. The report recommends that banks "disclose comprehensive financed emissions data and commit to financed emissions reduction targets of at least 3.9% per year."

"The climate footprint of energy financing activities is estimated to be 100 times larger than those that banks emit through operations," Amanda Starbuck, Energy & Finance Campaign director for RAN, said. "The time has come for banks to address the global impacts of doing business with fossil fuel industries and come clean on their commitments."

"Banks will need to shift financing from fossil fuel-based power sources to low-carbon energy infrastructure for our communities and the climate," report author Ben Collins of RAN said. "One way of doing that is by measuring the climate impact of investments and committing to reduction targets for financed emissions, now."


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