Banks look to measure climate impact

New standard will help companies stay aware of impact on emissions

Agroup of financial institutions including Morgan Stanley, Bank of America Corp. and Citigroup Inc. are introducing a global accounting standard to gauge the climate impact of financial transactions.

The method lets companies measure greenhouse-gas emissions tied to their loans and investments, a key step in advancing climate goals, the Partnership for Carbon Accounting Financials said in a statement Wednesday.

Firms in the past have received limited guidance on how to gauge their impact, Giel Linthorst, executive director of the secretariat of PCAF, said in an interview. The standard, which covers commercial real estate, mortgages and other asset classes, will help firms stay aware of how they’re contributing to emissions and enable comparisons between companies, he said.

Financial firms have come under pressure to address their effects on the environment, and many have made commitments in recent months. Morgan Stanley, which joined PCAF in July, has pledged to eliminate net emissions from its financing activities by 2050.

Eighty-seven firms around the world with $17.8 trillion (U.S.) in total assets have joined PCAF and committed to reporting their finance-related emissions, according to the group. Once firms join, they have three years to gather data and begin publishing annual reports, Linthorst said. The goal is for companies to integrate climate disclosures into their financial reports, he said.

PCAF expects to expand to 100 firms by the end of the year, and hopes to reach 250 firms in 2022, according to Linthorst. The group aims to add more asset classes, including sovereign bonds and green bonds, to its standard next year, he said.

Several companies within PCAF, including Morgan Stanley and Bank of America, created the standard over the past year and sought feedback from other financial firms and policy-makers, the group said.