[2024-Dec-12] WG2 Seminar on Carbon Accounting and Reporting for Financed Emissions

The GIP Working Group on Sustainability Information Disclosure (WG2) hosted a seminar on December 12, 2024, focusing on carbon accounting and reporting for financed emissions. Given that the event coincided with PCAF’s visit to China, the seminar welcomed speakers from PCAF, as well as representatives from multinational and Chinese banks, along with industry experts. They discussed the latest practices, challenges, and disclosure guidelines related to financed emissions. The seminar also featured a panel discussion exploring the difficulties and practical approaches to reporting financed emissions.

The seminar began with opening remarks from Cheng Lin, Head of the GIP Secretariat Beijing Office, and Huifeng Zhang, Managing Director of Corporate Sustainability at HSBC Asia Pacific. Both emphasized the importance of measuring financed emissions and highlighted the critical role of standardized methodologies, such as those provided by PCAF, in enabling financial institutions to accurately measure emissions and align their practices with global climate goals.

The first part of the seminar featured presentations on recent updates to carbon accounting methodologies, the practices of multinational and Chinese financial institutions in measuring financed emissions, and an overview of relevant Chinese policies and guidelines.

Ivan Frishberg, Global Board Chairman of PCAF, provided an update on PCAF’s methodologies and their expanding scope. Beyond measuring financed and facilitated emissions, PCAF’s updated approach now includes guidance on insurance-associated emissions, sub-sovereign debt, securitized and structured products, as well as transition and green finance. He emphasized that by joining PCAF, members gain access to technical assistance, a comprehensive emissions factor database, and interoperability with other global standards, thereby encouraging more financial institutions to participate.

Ronali Perera, Director of Climate Analytics at HSBC Group Sustainability, presented HSBC’s experience in navigating the data challenges of financed emissions accounting. Key obstacles include data availability, volatile metrics, sector mapping complexities, challenges in calculating facilitated emissions, and insufficient consistency and comparability. She noted that tools like rolling averages for facilitated emissions and detailed attribution analysis are critical for achieving transparency, consistency, and actionable insights.

Ren Feizhou, Senior Manager of the Green Finance Department at Bank of Huzhou, highlighted the bank’s innovative approach to calculating financed emissions. Combining in-person due diligence with online data collection helps address data availability issues. For larger enterprises, the bank leverages government-backed data through its Credit Asset Carbon Accounting System, which supports the creation of emission factor databases. For SMEs, the bank conducts thorough on-site evaluations to close data gaps, ensuring more accurate emissions assessments.

Sabrina Zhang, CEO of Smart ESG, introduced China’s evolving policy and guidelines on financed emission disclosure. She noted the increasing regulatory focus on climate risk and disclosure in the banking and insurance sectors, illustrated by the CBIRC’s green finance assessment and ESG disclosure guidelines.

The second part of the seminar featured a panel discussion with experts from PCAF, regional banks, professional service providers, and think tanks from Southeast Asia, Central Asia, China, and other regions. The panelists shared insights into regional and global challenges in carbon accounting for financed emissions.

Dina Zhanadil, Managing Director at the Development Bank of Kazakhstan, described the bank’s progress in improving sustainability disclosures through global standards adoption, independent verification, and mandatory borrower-level emission disclosures. She emphasized that verification is essential to preventing greenwashing and that financial institutions must remain both agile and patient when engaging with borrowers and stakeholders.

Prabina Khanal, Asia-Pacific Coordinator and Technical Assistance Lead at PCAF, agreed that data availability and quality, along with inconsistent methodology application, pose significant challenges for APAC financial institutions. She pointed out that joining PCAF can help address these issues by providing emission factors, a data quality scoring system, and a capacity-building platform that enhances institutions’ ability to adopt best practices.

Via Azlia Widiyadi, Research Associate at the Climate Policy Research Unit of CSIS, highlighted the disclosure gaps in Southeast Asia, including misalignment between national and subnational reporting requirements, inconsistent firm-level data quality, and the predominance of external rather than internal pressures driving disclosure. She advocated for a regional disclosure standard and innovative, cross-ministerial approaches that provide incentives rather than impose regulatory burdens.

Valentina Wu, Director of Research and Development at SynTao Green Finance, outlined the company’s initiatives—such as emissions calculators and ESG rating platforms—that assist corporations in aligning with regulatory requirements. She identified challenges for Chinese companies, including inconsistent standards, materiality issues, emerging topics like biodiversity, and the voluntary nature of Scope 3 disclosures. SynTao addresses these challenges through capacity-building services and supporting global initiatives to enhance reporting practices.

Conrad Albrecht, Managing Director at the Eurasian Development Bank, discussed the bank’s efforts and challenges in carbon accounting in Central Asia. He noted that even when data quality is low, it is essential to begin measurement and disclosure efforts, and adhering to global standards like PCAF and GRI can guide improvements. He also pointed out that regulatory standards among member countries are generally similar, facilitating more consistent progress.