“Visualisation” of the Impact of Financial Institutions on Climate Change

Thursday, November 1, 2018

Japan - In recent years, as the first step in grasping the environmental impact of investment management and the market exposure of investment portfolios on climate change risks, there has been a global increase in institutional investors who measure and disclose the carbon footprint of investment portfolios. This movement was driven by factors such as the increase of interest in the topic of climate change brought by the 2015 United Nations Climate Change Conference (COP21), the Montreal Carbon Pledge – supported by the United Nations Environment Programme Finance Initiative (UNEP FI) and Principles of Responsible Investment (PRI) – that requires the disclosure of the carbon footprint of investment portfolio, and the French Energy Transition of Green Growth Act, which has made it mandatory for institutional investors to disclose their carbon footprint.

Meanwhile, the challenge is the standardization in the methodology of measuring carbon footprints. There is currently an array of methods for calculating carbon footprints, and there are numerous indices available for measurement. Additionally, terminology used to report and explain results varies remarkably between presenting organisations, making it difficult to compare reports.

Given these circumstances, institutional investors and financial institutions who recognised the importance of measuring of carbon footprints and the standardization of its reporting methodology have presented guidelines, some even before COP21 took place. In June 2017 the TCFD, in July 2017 the Portfolio Carbon Accounting Financials (PCAF) comprised of 12 financial institutions from the Netherlands, and in times before and after, initiatives and research agencies have presented guidelines for calculating the carbon footprint of an array of asset classes, including those of listed companies.

Nonetheless, the carbon footprints of financial institutions are still not disclosed in a manner that allows comparison. Therefore, in this report, we have calculated the carbon footprints of domestic stock portfolios (the top 50 GHG emitters), targeting the 16 major financial institutions in Japan. The resulting proportion of GHG emissions on the basis of percentage stake for each financial institution you can read in the report.


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