context: Scope 3 emissions are over 11 times greater than firms' direct emissions (Scope 1 + Scope 2), reports Global environmental disclosure platform CDP. Curbing them is imperative for meeting corporate net-zero and carbon neutrality goals.
Scope 3 emissions are generated indirectly through a bank’s clients. Typically accounting for over 90 percent of a bank’s total emissions, they reach as high as 98 percent for major clients.
Banks should urgently develop all-round transition plans, argues Ma Jun 马骏 Beijing Institute of Finance and Sustainability president, showing how carbon neutrality will be achieved across Scope 1, 2 and 3. The plans will enable banks to manage high-carbon asset risk, guide clients to curb emissions and focus on key areas of transition finance.
Carbon neutrality must be supported by banks measuring and curbing Scope 3 pollution. Extensive data collection, precise emission factor calculation and strict regulation are required.
Few banks, laments Ma, are capable of gauging Scope 3 emissions. Accurate data can be sourced for regulated clients within the carbon trading market. For non-regulated clients, however, banks need provide guidance in calculating and publishing their emissions, or estimate them via the ‘emission factor' method.
Such standards are urgently need for the PRC, contends Ma, not least for corporate greenhouse gas emissions. They should not only provide a broad, framework but clear timelines for rollout. Absent these, firms may fall short in ESG disclosure.