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. 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.
To enable all banks to measure their carbon footprint, Triodos Bank has played an active role partnering with others in the Partnership for Carbon Accounting Financials (PCAF) to develop a robust methodology to measure and account for the carbon emissions of loans and investments.
Importantly, we started using it in our own business in 2018; we covered about 68 percent of our portfolio. One year later we have - for the first time - measured the emissions of our entire portfolio of loans and investments.
5.9 billion car kilometers and 361.000 trees
The results clearly indicate that financing a sustainable economy reflects well on our footprint. By financing renewable energy projects like wind or solar farms we finance the production of green energy that should displace the need for energy production from fossil fuel sources like coal. These so-called avoided emissions are much larger than the actual emissions from our customers and the emissions that are absorbed from the atmosphere through, for instance, forestry projects.
In 2019 Triodos Bank and its investment funds financed renewable energy projects and energy saving projects that avoided the equivalence over 5.9 billion kilometres travelled by car.
Next to investing in renewable energy, Triodos Bank also financed forestry and nature development projects. This resulted in the absorption of greenhouse gasses equal to at least 361,000 mature trees. The emissions that were generated by the other loans and investments increased compared with last year, but that is mainly because we include our entire portfolio in this year’s assessment compared to about 68 percent in 2018.
1.5 degrees Celsius
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. By accounting for the carbon emissions, we can, ultimately, set climate targets and steer investments towards a low-carbon economy.
To make clear what needs to happen to make sure we don’t exceed 1.5 degrees, we are working on creating science-based targets. To date no methodology exists for the financial industry to set science-based targets. But that will change in 2020, and we expect to set targets for key sectors.
Global carbon accounting
Clearly, in order to have a real positive impact on the climate other financial institutions also need to start measuring their CO2 emissions and set reduction targets. Fortunately, we see more and more banks joining the movement towards carbon accounting. During 2019, PCAF developed into a global, funded programme, which aims to substantially increase the number of financial institutions using the methodology. By the end of 2019, 57 institutions had agreed to start using the PCAF approach and the number continues to grow.
And in February of 2020, PCAF and the General Council for Islamic Banks and Financial Institutions (CIBAFI), agreed to enable Islamic banks to measure and disclose the greenhouse emissions financed by loans and investments. CIBAFI represents the Islamic financial services industry globally and has over 130 members.
Triodos Bank will continue to collaborate with partners to encourage others to start work on carbon accounting. 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.