A growing number of financial institutions are making the CO2-impact of their investments and loans visible. They are thus taking an important step towards aligning their portfolios with the Paris climate goals.
Worldwide, 57 financials have now adopted the PCAF carbon accounting methodology, of which APG is one of the founding members.
PCAF’s latest report, presented at the Madrid Climate Summit, shows the progress that has been made with its carbon accounting methodology. At present, 57 financials with total assets of 3.5 trillion USD in assets have adopted the Partnership for Carbon Accounting Financials’ guidelines and methods. It is strong indication that the initiative – which started out in 2015 as a cooperation of 12 Dutch financial institutions – has evolved into a worldwide collaboration.
No exact science
In his contribution to the report, APG’s chair Gerard van Olphen underlines the importance of harmonized CO2 disclosure guidelines and methods. “Laudable carbon reduction intentions are meaningless without solid, trustworthy carbon accounting. With the consequences of climate change becoming increasingly visible around us, responsible investing intentions in cadence with robust carbon accounting is needed more than ever.”
In 2015, APG’s pension fund clients adopted the target to reduce the carbon footprint of the listed equity portfolio with 25% in 2020 (compared to 2015). “Currently, we have achieved a reduction of 29%, so well on track to meet our clients’ target”, says Joost Slabbekoorn, responsible investment specialist at APG. “But measuring emissions is not an exact science. We want it to be more than a paper exercise, and therefore the assumptions underlying the calculation must be transparent and verifiable. This is essential to establish trust and, ultimately, to make a meaningful contribution to reduced CO2- emissions.”
Commitment of the Dutch financial sector
APG believes that the financial sector can play a vital role in the transition to a low-carbon economy and the realization of the Paris climate goals. To underline this, Van Olphen recently chaired the Financing Task Force which focused on the contribution of the financial sector to the Dutch Climate Agreement. The commitment of the financial sector requires parties, among other things, to disclose the carbon footprint of relevant loans and investments (2020) and to announce plans of action and reduction targets for 2030 (no later than 2022).
The commitment of the Dutch financial sector does not prescribe a specific method for reporting, explains Slabbekoorn. “PCAF brings the experience with measuring carbon footprints of different parties together. In this way we learn from each other and will move faster in our aim to contribute to the Paris climate goals. Also, harmonization in terms of reporting is needed for the Dutch financial sector to be able to collectively report on its contribution to reduced emissions.”
The road ahead
APG’s largest client, pension fund ABP, is currently in the process of defining a new responsible investment policy for the period 2020-25. “A carbon footprint target is likely to feature again as part of the new policy”, says Slabbekoorn. “Also, as part of the Dutch Climate Agreement, we will also devise ways to measure the carbon footprint of other asset classes beyond listed equity.”