The COP26 announcements of reduced emissions require credible decarbonization plans and a structured approach for constructing them.
During the 2021 United Nations Climate Change Conference, known as COP26, several Financial Services Organizations (FSOs) announced targets to reduce their financed greenhouse gas (GHG) emissions.
More than 450 firms, including several firms in the Nordics, representing assets worth US$130 trillion, have now signed up to the Glasgow Financial Alliance for net-zero (GFANZ) committing to reach net-zero by 2050 and toward providing 2030 interim goals. That is good news and now is the time to go from ambition to action.
The recent EY report titled How can FS firms turn carbon ambition into real-world action? addresses the key role of FSOs in the global response to the climate crisis. It addresses the uncertainties and challenges FSOs face and sets out a practical four-stage approach to build credible decarbonization plans.
Download the report: How can FS firms turn carbon ambition into real-world action?
“Credible decarbonization plans allow firms to build confidence in their net-zero targets and provide stakeholders with a clear rationale regarding ways to achieve them,” says Pehr Ambuhm, Sustainable Finance Leader, EY Nordics. Building your emission baseline is complex and judgmental. Setting the boundaries for your emissions ownership is a particular challenge in assessing the FSOs emissions footprint. Many FSOs struggle to understand where the boundaries for emission that they own are drawn, what should be accounted for within different scopes and which quantification methodologies should be used or are required. “FSOs need to review clients’ emissions profiles associated with client activities that they fund, invest in, insure or facilitate,” says Pehr Ambuhm. As the data is often inconsistent or incomplete, FSOs need to use proxies and industry averages as a supplement for the data collected directly from counterparties.