A picture containing outdoor, ground, sidewalk

A new path to achieving net-zero

The Partnership for Carbon Accounting Financials bring banks together to collaborate on how to better measure and address carbon emissions

Businesses large and small are making great strides in accounting for their impact when it comes to sustainability. Some 90% of major U.S. companies now issue annual reports to outline environmental, social and governance (ESG) practices, programs and policies, compared to just 20% a decade ago.footnotei While such accountability is encouraging, a new cooperative project has the potential to accelerate progress on key environmental and social issues even further.

The Partnership for Carbon Accounting Financials (PCAF) is a global partnership of financial institutions that work together to develop and implement a harmonized approach to assess and disclose the greenhouse gas (GHG) emissions associated with their loans and investments. PCAF has developed a consistent methodology for measuring and disclosing such emissions, which include those associated with corporate/business loans, commercial real estate loans, residential mortgages, motor vehicle loans, project finance and even the equity and bond positions that banks hold on their balance sheet.

Driving the partnership is an awareness that shareholders are increasingly advocating for a healthy environment. By joining PCAF, companies can help to drive a consistent framework for financial institutions to measure financed emissions as well as providing a useful tool in the management of these emissions, which is a critical component to address climate change. The initiative was spearheaded by Dutch and North American banks, Bank of America joined PCAF in 2020, and has now been taken up as a global initiative. Businesses increasingly know they have a critical role to play in accelerating the transition to a low-carbon, more sustainable economy. And financial services are looking to set the standard in the area of measuring GHG output across a portfolio, given the sector’s scope and ability to influence other industries through investments.

The potential to track every dollar’s emissions

Because the financial services sector is critical to new development across all industries, its loans and investments have the potential to contribute to carbon emissions through client activities, such as a real estate development project, capital loan to fund a small business’s payroll, or the construction of a commercial property.

It has traditionally been challenging to account for emissions beyond direct operations. Through PCAF’s work, financial institutions will be able to utilize a defined methodology to measure, better understand and manage the full impact of their business activities.

Joining PCAF is one component of Bank of America’s efforts to reach net-zero greenhouse gas (GHG) emissions in its financial activities, operations and supply chain before 2050. The bank is also dedicating significant financial capital to support the advancement of developing low carbon technologies, such as sustainable agriculture and biofuels, water infrastructure, clean hydrogen, waste-to-energy, and carbon capture sequestration technologies. And, its new supply chain commitment includes ensuring that 70% of global suppliers, by spend, set GHG emissions reduction or renewable energy targets.

Learn more about Bank of America’s sustainability commitments, including its efforts to grow its Environmental Business Initiative, which mobilizes financing to low-carbon and sustainable business activities around the globe, and work to develop the Stakeholder Capitalism Metrics, a set of ESG metrics and disclosures released by the World Economic Forum and its International Business Council.

2020 S&P 500 Flash Report, Governance & Accountability Institute, July 2020

i

9/14/2021