To achieve net-zero emissions, every economic sector must decarbonise. A continuously growing number of economic actors measure and transparently report reliable greenhouse gas (GHG) emissions. Understanding a company’s environmental impact is vital for aligning its operations with society’s goals as set out in the United Nations Sustainable Development Goals and international agreements such as the Paris Climate Agreement.

Financial institutions committed to net zero not only look into their own emissions, but also assess the climate impact associated with their financing, investment and underwriting activities. In doing so, they proactively support and incentivise the transition of the economy as a whole.

This article presents UNEP FI’s fourth recommendation on credible net-zero commitments as outlined in a UNEP FI input paper to the G20. The 11 recommendations, alongside this series of articles, aim to support policymakers in understanding the progress to date and how to scale up the global transition to a net-zero economy.

Measure climate impact

By quantifying financed emissions, financial institutions take a concrete step towards integrating their net-zero commitment into the core of their operations. Accounting for GHG emissions is a complex task that requires robust and standardised frameworks that support the measurement of GHG emissions throughout the entire value chain, such as the Global Greenhouse Gas Protocol.

To effectively embrace emission reduction objectives targets for CO₂ and other GHG emissions should be established in line with the emissions phase-out trajectories of the counterparties. By adopting emission targets across all activities, financial institutions can effectively measure their carbon footprint. The carbon footprint allows them to improve their own operations, while also engaging actively with clients to optimize their businesses in a more sustainable manner.

Inform the market

Voluntary disclosure frameworks have been driving the transparent reporting of GHG emissions associated with financed activities. While we are witnessing a substantial increase in sustainability disclosure requirements across jurisdictions, a global sustainability disclosure standard is key to achieve comparability across companies and jurisdictions worldwide.

Harmonised, reliable and comprehensive disclosure of GHG emissions will foster sustainable business decisions and help economies reach net zero by 2050.

In conclusion, financial institutions play a distinctive role in enabling the shift towards a net-zero economy, even though they are not major emitters of GHGs themselves. Measuring the transition trajectory starts with measuring GHG emissions. By advancing the development of sustainability disclosure standards, policymakers will encourage all economic actors to assess and transparently report on GHG emissions, based on a harmonised global framework.

Download UNEP FI’s G20 input paper to access the full set of recommendations for credible net-zero commitments from financial institutions.

Download the UN Secretary General’s High Level Expert Group Integrity Matters Report to access the full set of recommendations for all economic actors.