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Exclusive: Banks vote to limit accounting of emissions in bond and stock sales

  • Banks back accounting for 33% of capital market-linked emissions
  • Environmental advocates push for 100% attribution
  • PCAF board expected to back the 33% weighting, ending delays

LONDON, July 30 (Reuters) – Banks working to develop global standards on accounting for carbon emissions in bond or stock sale underwriting have voted to exclude most of these emissions from their own carbon footprint, three people familiar with the matter said.

The majority of banks comprising an industry working group backed a plan earlier this month to exclude two-thirds of the emissions linked to their capital markets businesses from being attributed to them in carbon accounting, the sources said, following months of discord over the issue.

If upheld, the decision would pit banks against environmental advocates, many of whom say the banking industry should assume full responsibility for the emissions generated by activities financed through bonds and stock sales, as it already does with loans.

Almost half of the financing provided by the six biggest U.S. banks for top fossil fuel companies came from capital markets rather than direct lending between 2016 and 2022, according to environmental group Sierra Club.

Banks’ accounting of these emissions will impact their targets for becoming carbon-neutral. Major lenders have pledged to bring their emissions down to zero on a net basis by 2050, and have set interim targets for this decade.

Banks with big capital markets operations in the working group argued that they should assume responsibility for only 33% of the emissions of activities financed through bonds and stock sales because they do not have control over the borrowers as they do with loans. The banks have also expressed concern about capital market-related emissions dwarfing their lending-related emissions, the sources said.

Those pushing for a low accounting threshold say assuming responsibility for 100% of the emissions would lead to double-counting across the financial system, because bond and stock investors will also separately account for some of the emissions generated by the financing activities in their own carbon footprints.

The majority of the banks in the working group backed the 33% threshold but at least two dissented, with one advocating for 100%, the sources said, requesting anonymity because the deliberations were confidential.

The accounting standard will not be mandatory. The Partnership for Carbon Accounting Financials (PCAF), an association of banks seeking to harmonise carbon accounting across the industry, formed the working group comprising major banks in the hope that others will follow the standard that emerges.

PCAF’s board will now have the final say on whether to adopt the 33% accounting share for capital markets. Two of the sources said no decision had been made but it was reluctant to override the working group.

A PCAF spokesperson did not respond to a request for comment.

The working group’s members are Morgan Stanley (MS.N), Barclays (BARC.L), Bank of America (BAC.N) Citigroup (C.N), HSBC (HSBA.L), BNP Paribas (BNPP.PA), NatWest (NWG.L) and Standard Chartered (STAN.L). Officials from all but two either declined to comment or did not respond to requests for comment.

A Barclays spokesperson said the bank supported PCAF’s work to establish standards for emissions and declined to comment further. A Standard Chartered spokesperson said the bank was comfortable with any emissions accounting threshold and declined to comment further.

The sources said PCAF had become frustrated at how much energy had been spent arguing over the right number, and believed any percentage was better than further delays. Publication of PCAF’s final methodology has been delayed since last year because of the disagreements.


Campaign group ShareAction said the 33% weighting had been “plucked out of thin air.”

“PCAF has the responsibility to publish guidance that enables a transparent and unbiased assessment of banks’ climate risks and impacts,” its research manager Xavier Lerin said.

It is not yet clear whether banks will have to bundle together their capital market-related emissions and their lending-related emissions into a single target, or separate them.

Having a single target but two accounting approaches for the different emissions could prove challenging, one of the sources said.

The Science Based Targets initiative, a separate body backed by the United Nations and environmental groups, is in the process of developing net-zero standards which will include whether banks should have different or combined targets.

Reporting by Tommy Reggiori Wilkes in London; Editing by Greg Roumeliotis and Rosalba O’Brien

Our Standards: The Thomson Reuters Trust Principles.

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