In 2017, the Task Force on Climate-Related Financial
recommends that all companies disclose not just their own
shown leadership in piloting and legitimizing climate-related
Disclosures (TCFD) published recommendations on how
operational emissions but also “if appropriate, Scope 3 GHG
disclosures among their peers.
companies should report on the risks that climate change
emissions and the related risks.”91 Scope 3 refers to emissions
poses to their businesses.87 The TCFD was a finance-industry
indirectly generated by company activities.92 For banks, this
That said, accurate disclosure of climate risk exposure still
initiative chaired by Michael Bloomberg. It recommends four
means financed emissions, and would include emissions
has a long way to go. While reporting is still in its early stages,
areas of disclosure — governance, strategy, risk management,
caused by all fossil fuel energy-related projects and companies
so far no bank has fully reported its financed emissions — an
and metrics and targets — with additional guidance for how
they finance. If the $1.9 trillion in fossil fuel funding revealed in
indication that banks remain wary of associating themselves
the financial sector can lay out the transition and physical
this fossil fuel finance report card indicates anything, it’s that
with these emissions.97
risks they face from climate change. Transition risks are
banks are responsible for an enormous amount of greenhouse
those that financiers face from loans and investments in fossil
gas emissions through their financing.
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fuel-intensive sectors that will need to be rapidly phased out
And, of course, disclosure is just the first step. The next and more important step is alignment with the goals of the Paris
to mitigate climate change; physical risks are those from the
In order to limit global warming to 1.5°C, emissions must be cut
Agreement. At the end of the day, if the TCFD is to be a
impacts of climate change to infrastructure and supply chains.
to effectively zero by 2050 (see page 21) — which means that
tool to not just measure but mitigate the climate crisis, then
disclosure of these financed emissions indicates how far a bank
companies must reflect on their lessons learned and use them
is from aligning its business with the Paris Agreement.
to adapt their business strategies — and their shareholders
The TCFD’s specific guidance for banks notes: “Banks that provide loans or trade the securities of companies with direct
must pressure them to do so. Upon full disclosure of its financed
exposure to climate-related risks (e.g., fossil fuel producers,
Sixteen banks have joined with the United Nations Environment
emissions, it would be difficult for a bank to justify letting the
intensive fossil fuel consumers, real property owners, or
Programme (UNEP) Finance Initiative to begin to pilot
fossil-heavy part of its business carry on unrestrained. After all,
agricultural/food companies) may accumulate climate-related
implementation of the TCFD’s recommendations, including
the ultimate risk at play is not whether the financial sector will
risks via their credit and equity holdings.” The disclosure
Barclays, BBVA, BNP Paribas, Citi, RBC, Santander, Société
survive the climate crisis with padded pockets — it’s whether
exercise is primarily framed as a way for banks to understand
Générale, Standard Chartered, TD, and UBS.93
our shared planet and humanity itself will survive.
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how climate change will impact their bottom line — and for shareholders in banks to understand the relative exposure of
Citi, Standard Chartered, BBVA, RBS, UBS, and ANZ were some
their investments to climate change, with the implication that
of the first banks to publish disclosures aligned with some of
the shareholders will use this information to pressure the banks
the TCFD recommendations.94 For instance, Citi used scenario
to reduce their climate exposure.
analysis — including, specifically, a scenario in which global warming is limited to 1.5°C — to understand how climate
The TCFD recommends that banks report on their credit
change will affect its credit exposure to certain groupings
exposure, equity and debt holdings, or trading positions in
of high-carbon clients.95 ANZ, in its reporting, disclosed its
“carbon-related assets,” which TCFD suggests to be narrowly
exposure to oil and gas, coal mining, and electric utilities.96
defined as “assets tied to the energy and utilities sectors.”
TCFD is an important initiative echoing a broad upsurge in
Additionally, in the “metrics and targets” area, the TCFD
discussion of climate change, and these companies have
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