As our main impact in the economy and society stems from our loans and investments, PCAF's harmonised approach on carbon accounting focuses on measuring the carbon footprint of loans and investments. Triodos Bank implemented the PCAF methodology for the first time in 2018 and extended the scope of our carbon accounting to 100% of our loans and funds’ investments in 2019.
By mapping the emissions per asset class, we can see our current hotspots within our portfolio. This provides useful guidance for steering a (long-term) strategy that is in line with the Paris Agreement via the Science Based Targets initiative (SBTi).
For readers with a more detailed interest, a separate methodology report on how the PCAF standard was applied to this portfolio is available on our website.
Widespread adoption of the PCAF standard will allow stakeholders to compare the GHG emissions of banks and other financial institutions. As one of the first banks to report in this way, we actively collaborate with our partners to encourage others to do the same.
Target setting: hitting the target without missing the point
Triodos Bank is in the process of setting appropriate targets to align the organisation’s portfolio with the Paris Agreement. But we don't want these to adversely affect the way we work. We aim not just to set targets but to identify effective plans for executing them in a way that supports a sustainable and inclusive transition. This may not lead to reductions in the short term, for instance by financing more houses in the transition towards energy efficiency. In the longer term it will ensure we tackle global warming in a structural way.
We intend to use these targets to help deliver our mission, financing positive impact while supporting social inclusion. Our portfolio’s actual emissions provide a baseline. We can therefore start to improve and monitor our progress in working with our clients to reduce their emissions.
Our climate impact report shows that we have a relatively low climate intensity from our loans and funds' investments, however we are researching how quickly we may be able to take the lead in reaching a net-zero portfolio (and beyond). This requires us to critically reflect on our portfolio and we want to make sure we do this carefully rather than setting targets quickly. We will disclose our transition plan with long- and short-term targets by COP26, 2021.
Other financial institutions will need to plot a similar path if we are to play our part as an industry in keeping the global increase in temperature within acceptable bounds.
Triodos Bank has urged the financial sector to divest its fossil assets and in our 2019 vision paper on energy and climate we call on all financial institutions to take a leading role in addressing the climate emergency.