That’s why some influential organisations around the world have stopped discussing ‘climate change’ and now routinely reference the ‘climate emergency’. It also explains why in many countries thousands of children have taken to the streets, and why the UK’s ‘extinction rebellion’ captured headlines earlier this year. The message is simple; we have to change and we have to change fast.

For the financial industry to play its part and to accelerate the change we need, banks and other investors must first know more about the CO2 impact of their assets.

In 2018, Triodos Bank measured the greenhouse gas emissions of its activities for the first time, using the Platform for Carbon Accounting Financials (PCAF) methodology. James Niven is responsible at Triodos Bank for assessing and reporting on our climate impact and explains the reason why we do this increasingly important work.

Why do banks need to know more about their CO2 impact?
Banks have an impact on the real economy, on society and on the climate, through the choices they make about who they finance. Almost all customers that we lend to, or invest in, have carbon emissions. We want to know what these emissions are, so we can be transparent about the climate impact of our loans and investments.

James Niven, Head of Impact Assessment and Reporting
James Niven, Head of Impact Assessment and Reporting

This will also help us to set climate targets so we know, and can demonstrate to our stakeholders, what our contribution is to a safe increase in global temperature. In this way we, and the banking sector more broadly, can monitor our greenhouse gas emissions, create opportunities for comparison between institutions and be more accountable. And, as a customer, you will be able to see how you impact the climate with your savings.

That’s why an initiative announced by a group of front-running Dutch financial institutions, during the Paris Climate Conference in 2015, is so important. These institutions called on the negotiators at the Paris Climate Summit in 2015 to take on board the role that investors and financial institutions could play to deliver the radical shift we need to a low carbon economy.

More practically, the group committed to create a more transparent approach to assess the greenhouse gas emissions of their loans and investments, for stakeholders inside and outside the Dutch financial industry. The group created the Platform for Carbon Accounting Financials (PCAF). It was the world’s first effort of its kind, by the financial industry, for the financial industry. And it succeeded.

Triodos Bank measured its CO2 emissions for the first time. What are the highlights?
For many years Triodos Bank, and others, have measured the carbon or more accurately, the greenhouse gas emissions of our own operations, such as the energy used in our buildings or the travel of our co-workers on business. But this accounts for a very small proportion of our overall footprint. The emissions from our loans and investments are much more significant. That’s where we, via our customers, make our biggest impact. And that’s what we reported for the first time this year.

Happily, our initial results confirmed that financing a sustainable economy since Triodos Bank began has resulted in substantial ‘avoided emissions’. By financing renewable energy projects like wind or solar farms, for example, we finance the production of green energy that should, in time, displace the need for energy production from fossil fuel sources like coal.

Also, we believe our clients in general have relatively low actual emissions, by which I mean greenhouse gasses that end up in the atmosphere and contribute to increases in global temperature. That’s because our customers care about many of the things that we do, such as taking care of the environment for future generations – as well as connected issues like social inclusion and cultural development. The results also show that the small number of forestry and nature projects that we finance absorb a relatively large amount of CO2 from the atmosphere via ‘carbon sinks’ like trees and grasslands.

We are one of the first banks to measure the CO2 impact of its loans and investments, so it is difficult to compare our results with those of other banks. But, given our mission and the focus of our finance, it’s safe to say that our results compare well to the emissions of mainstream banks. We plan to explore what these differences are further in the future.

So, is Triodos on track to limit global warming to 1.5 degrees?
We want to make sure our activities and emissions contribute to, at most, a 1.5 degrees global increase in temperature. This is the safe limit of an increase in temperature from pre-industrial levels, defined by the Intergovernmental Panel on Climate Change, or IPCC. The assessment we have done now is a first step to understanding where the impact of the loans and investments we finance are in relation to this figure. While we can safely claim the footprint of our work compares very well with most banks, we cannot calculate yet whether we are within the goal of the maximum of 1.5 degrees global warming. We are going to work on meaningful targets to try and reduce the generated emissions of our loans and investments and increase our avoided and absorbed emissions. You’ll hear more about them in future reports.

We will also work on creating science-based targets. These targets will make clear what needs to happen to make sure we don’t exceed 1.5 degrees. We are co-sponsoring the development of a methodology, together with other members of PCAF, for the financial industry to set these targets.

Triodos Bank’s actual emissions are far lower than its avoided emissions. Does this mean Triodos has a positive impact on the environment?
It is not a good idea to compensate actual emissions, which are released into the atmosphere, with avoided emissions in an organisation’s reporting. A farm’s activities, for example, release greenhouse gas emissions into the atmosphere. While green energy generated by a solar project, to use another example, ‘avoids’ the need for energy produced from carbon intensive fossil fuel sources. But the solar project does not remove the greenhouse gas emissions from the farm from the atmosphere, in this example. They remain. And, unless they are removed by a carbon sink – such as a new forestry project – they will contribute to global warming for a very long time.

The solar project should, in time, replace the need for energy from fossil fuels but they do not ‘cancel emissions out’. Given that we only have a finite amount of carbon that can be emitted into the atmosphere before the temperature goes above 1.5 degrees, these distinctions matter.

Why don’t you just invest more in forestry and nature development to absorb greenhouse gasses?
Forestry and nature development are very effective to remove greenhouse gasses from the atmosphere and are therefore an interesting option to invest in. But as a global community we need to stop doing some of the things that are intrinsically bad for the environment, like burning fossil fuels, as well as start doing more of the good things.

We also believe that we need to support social and cultural initiatives next to different sorts of environmental projects to achieve our mission to change the world for the better. Our customers also want, and most likely need, to reduce their greenhouse gas emissions and we feel a responsibility to help them.

Organic farming has the highest CO2 emission intensity in Triodos Bank’s loan portfolio. What does this mean for your activity in this sector?
We think it is necessary to completely change the way food is produced, traded and consumed in order to provide enough quality, nutritious food for the growing world population without severely damaging our planet, people’s health and social equality.

We invest in this transition to more sustainable agricultural systems and consumption patterns by financing businesses across the supply chain that safeguard nature, promote fairness and transparency, improve livelihoods of farmers and encourage careful consumption.

At the same time, we want to better understand the emissions associated with different types of organic agriculture, including its regenerative capacity - by which we mean its ability to sequester emissions as well as emit them. As our carbon accounting work progresses, we hope to learn more about this area and share it with you via our reporting.

What are Triodos Bank’s next steps relating to its CO2 emissions?
I’ve already mentioned science-based targets. We will work on them together with experts. We really need these targets to make informed decisions about where we lend and invest, and to report to our stakeholders on our progress.

We also plan to improve the quality of the greenhouse gas emissions data we report. We are working with others in the PCAF group and the Central Bureau of Statistics, in The Netherlands, for instance to get better information about the energy use of the homes we finance.

And, of course, we will continue to report on our climate impact. We will collaborate with partners to encourage others to also report on theirs. Because ultimately, all banks should set climate targets and customers should be able to make meaningful comparisons between the emissions of one bank and another.