You can’t track what you don’t measure – and that’s especially true when it comes to carbon emissions.
That’s why the Partnership for Carbon Accounting Financials – PCAF for short – created the Global Greenhouse Gas Accounting and Reporting Standard, a uniform set of metrics that helps financial institutions calculate the carbon footprint of their loan and investment portfolio.
The Standard was put together as demand for a harmonized method to track carbon outputs has risen in the financial sector. PCAF is an “industry-led initiative” that was started in 2015 by Dutch banks and made its way to the United States in 2018. The Standard is being used for the Climate Change Commitment, which Sunrise Banks is a part of.
PCAF’s system measures and discloses the greenhouse gas emissions of six different asset classes: Listed equity and corporate bonds; business loans and unlisted equity; project finance; commercial real estate; mortgages; and motor vehicle loans. The idea is that by tracking and, in some instances, cutting the emissions of their clients and investments, financial institutions can act as better stewards of the environment.
The move to create a standardized system for tracking carbon emissions among financial institutions is an important step in the fight against climate change, especially given the influence the banking sector has on the issue. A recent report from the Sierra Club says banks have invested more than $2 trillion in fossil fuels since the Paris Climate Agreement was reached in 2015.
PCAF aims to change this behavior and states that more than 85 financial institutions – accounting for upwards of $17 trillion – have now committed to the Standard.
But it’s not just PCAF that’s trailblazing its way to a more sustainable banking sector. More and more, the use of technology is inserting itself into the climate change conversation. Climate fintech, for example, utilizes financial technology to help consumers and banks make more sustainable decisions with their money.
The negative effects of climate change touch nearly every part of our lives – our finances, health, work and even national security. A warming planet has major implications for global economic health, ranging from a less productive workforce to massive losses caused by natural disasters.
The risks underscore the importance of mitigation efforts. PCAF has taken a major step in first defining what financial institutions should measure in order to maintain a sustainable planet for future generations.
Learn more about Sunrise Banks’ triple bottom line of people, prosperity and planet here.