Banks Propose Disclosing Just 33% of Capital Markets Emissions

2023-07-31 21:59

A majority of investment bankers tasked with setting the first industry standards for calculating the carbon footprints of

A majority of investment bankers tasked with setting the first industry standards for calculating the carbon footprints of capital-markets activities have endorsed a compromise deal that would see banks report only one third of emissions related to stock and bond underwriting.

More than half of the eight-member working group chaired by Barclays Plc and Morgan Stanley voted for disclosing just 33% of so-called facilitated emissions, according to a person familiar with the process who asked not to be named discussing non-public information. Two members of the group, which was assembled in early 2021 by the Partnership for Carbon Accounting Financials, voted for 100%, the person said.

Unlike banks’ lending activity, where there is broad agreement on how to attribute emissions, assigning responsibility for facilitated emissions remains a contentious subject. Since corporate bond sales rarely remain on a bank’s balance sheet once they’re issued, some banks argue that assigning 100% of the CO2 to their books would be unfair.

Some dealers also want a lower attribution factor because their capital markets business are much bigger than their lending activities. Climate activists, which are increasingly targeting banks for their role in enabling planet-warming pollution, have lobbied for lenders to disclose 100% of facilitated emissions.

The option to disclose 33% of facilitated emissions was put forward earlier this year as a compromise to unlock a months-long stalemate at the working group. Other proposals included 100% and 17%, which reflects capital markets’ share of all industry financing and derives from analysis by the Basel Committee on Banking Supervision.

PCAF’s board still needs to approve the 33% attribution factor for capital markets before it becomes official guidance, the person said. Reuters earlier reported on the support for 33%.

A spokesperson for PCAF wasn’t immediately available to comment.

By including the impact of bond and equity underwriting, policymakers, regulators and investors will now get a much clearer picture of how green — or not — a lender is. Several major banks have said they’ll disclose their facilitated emissions and set targets to reduce them once the PCAF standard is published.

--With assistance from Frances Schwartzkopff.