Union Bank of India on 9 September announced its decision to become a signatory to the Partnership for Carbon Accounting Financials (PCAF).
- This step aligns with the growing global emphasis on climate risk management and the recent draft guidelines issued by the Reserve Bank of India (RBI) on climate risk disclosures.
Partnership for Carbon Accounting Financials (PCAF)
- The Partnership for Carbon Accounting Financials (PCAF) is an industry-led partnership to facilitate transparency and accountability of the financial industry to the Paris Agreement.
- In 2015, fourteen Dutch financial institutions created PCAF, under the leadership of ASN Bank. The initiative was launched via a Dutch Carbon Pledge calling on the negotiators at the Paris Climate Summit in 2015.
- Now, PCAF is open to any financial institution in the world and therefore it has developed GHG accounting methodologies that apply to any financial institution.
- The following asset classes are currently covered by the methodology: listed equity & corporate bonds, business loans and unlisted equity, project finance, mortgages, commercial real estate and motor vehicle loans.
- Financed emissions, often referred to as Scope 3 emissions, represent the indirect emissions that result from a Bank’s lending and investment activities.
- These emissions can significantly outweigh a Bank’s operational emissions and pose substantial risks to its portfolio in the face of climate change and evolving regulations.
- The importance of tracking financed emissions has been underscored by the RBI’s recent draft guidelines on ‘Disclosure framework on climate-related financial risks, 2024’, issued on February 28, 2024.
