Delivering the scale of carbon reduction needed for a net zero world by 2050 demands companies transform - decarbonising their value chain, and by helping the world to get to zero emissions. For financial services, the bulk of emissions across the value chain sit outside of its own operations, and relate to its investment portfolio. Financial services can leverage capital and influence across its portfolio of investments, namely by increasing low-carbon investment and supporting the transition of its investment portfolio. There is a real opportunity for these companies to play an instrumental role in the climate transition, and an ever growing number of financial services are embarking on the challenge.
In order to tackle climate change effectively, companies need to understand which parts of their business emit the most greenhouse gases. For financial services, greenhouse gas (GHG) emissions across the value chain differ significantly to that of other economic sectors. Emissions from their own operations and their upstream supply chain are relatively minor, associated with fuel consumption at offices and branches, alongside business travel and waste.
The majority of emissions sit in their downstream portfolio of loans and investments. Financial services are in the early stages of measuring and reporting this impact, but it is thought to equate to over 95% of their value chain impact.
Companies can understand their total impact by conducting a GHG value chain assessment, supplementing available company data with modelled estimates. Cozero Log can help with this.
While emissions from operations appear relatively small, they are still significant and provide an important starting point in any carbon action plan. Increasing the energy efficiency of company sites, procuring renewable power and heat, using low carbon refrigerant, and reducing waste delivers carbon and cost reduction. Tackling business travel and employee commuting is also significant.
In leveraging GHG reduction across their investment portfolio, there are a number of strategies financial institutions can take.
First, they can choose to allocate capital and steer financial flows towards more low carbon and climate resilient activities. This could be by committing to cease financing of fossil fuel energy generation. Second, they can develop green products for customers such as energy efficiency loans; and loans to installation of solar panels or electric vehicles.
Finally, they can take steps to engage with customers to support them in the transition to a low carbon economy. For instance, providing companies with advice and a carbon management tool will both support decarbonisation of these companies, and will help to build the data, tools and transparency required to embed climate change into how the market functions.
Cozero is a carbon management tools that recommends the carbon actions and solution providers to help companies focus on where action is needed most. Cozero Act supports companies to develop and manage bespoke carbon management action plans, as well as transparently track progress against these.