Emissions generated by how banks manage corporates’ cash holdings can significantly add to a company’s total greenhouse gas emissions, but currently escape reporting. A new guide details actions companies can take to reduce these emissions and by doing so support accelerating the decarbonization of the financial sector.
A new guide examines a critical yet overlooked driver of corporate greenhouse gas emissions – the emissions associated with how banks manage and repurpose the cash deposits of their corporate clients for emission-producing activities.
A critical revelation of this guide is that if emissions from corporate cash holdings in the bank were counted, many businesses would see a notable surge in their reported overall greenhouse gas emissions. The guide provides actionable advice for how climate leading companies can be frontrunners in recognizing, measuring and mitigating these emissions. That’s although they are not yet required to report such emissions along their financial supply chains as the relevant Greenhouse Gas Protocol’s Scope 3 guidance applies only to financial institutions and investors, but not to real-world companies.
The Greening Cash Action Guide: How to reduce emissions from companies’ cash deposits in the bank outlines seven actions companies can take to assess and curtail emissions associated with how banks manage their corporate cash. By proactively engaging with their banks and encouraging better data disclosure and climate practices, companies can use their role as corporate customers to send important market signals to their banks to reduce the carbon intensity of their loan and investment portfolios, which, in turn, helps accelerate the broader decarbonisation of the financial system.
The guide was developed for business leaders, sustainability managers, CFOs and treasurers and was authored by Johan Falk, Exponential Roadmap Initiative, Jakob König, Fair Finance Guide / Swedish Consumers’ Association, Paul Moinester, TOPO, and Allison Fajans-Turner, BankFWD.
The authors said:
Companies have to reduce emissions along their full value chain and that includes emissions in their financial supply chains. This guide gives practical and actionable recommendations how to measure and reduce the emissions they indirectly finance through their cash holdings in the bank.
Johan Falk, CEO and Co-founder of the Exponential Roadmap Initiative
This guide addresses a problem that we encountered when talking to the wealthiest companies in the world: that they are not aware of the magnitude of these emissions, and don’t know what to do about them.
Paul Moinester, Executive Director, TOPO
What banks choose to finance is key for the climate transition. With this guide corporate clients can help to accelerate their banks’ transition and in turn banks have an opportunity to add value for their clients. It’s a clear win-win that benefits the climate.
Jakob König, Fair Finance Guide / Swedish Consumers’ Association
Companies committed to driving climate progress have left a major lever on the table: namely, their power and influence on banks as major clients. By using this guide, companies can take steps to ensure that the banks that get their business are using company cash in ways that support and don’t undercut a company’s wider climate goals. This guide will help to cement climate safe banking as a new pillar of corporate sustainability and net zero planning.
Allison Fajans-Turner, Managing Director, BankFWD
This guide addresses two crucial levers for scaling and accelerating the transformation needed to stay within safe planetary boundaries: science aligned climate leadership from companies and financial actors. Its value lies in providing concrete actions companies can take with their banks to reduce financing of new emissions – and through these accelerate the transformation of the financial sector.
Professor Dr Johan Rockström, Director, Potsdam Institute for Climate Impact Research
Beyond their organisational inventory, corporations may not realise the emissions financed by their cash. This guide provides them with practical recommendations to start considering and driving down financed emissions.
Kaya Axelsson, Net Zero Policy Engagement Fellow, University of Oxford
Many financial institutions have committed to low-carbon targets and companies as corporate customers of financial institutions can play an important role here. This guide spells out how companies can engage with their banks to support accelerating the transformation of the financial sector.”
Gireesh Shrimali, Head of Transition Finance Research, University of Oxford
This guide sheds light on a blind spot in greenhouse gas reporting: Companies are not required to report on the emissions that are financed by their corporate cash and are most often not aware of their magnitude. The actions this guide recommends can be valuable first steps to reducing the emissions that companies indirectly finance.
Jimmy Jia, DPhil Candidate in Sustainable Finance, University of Oxford
Business voices said:
Business is a crucial player in the Net Zero transition. This guide shows what actions companies can take to reduce the emissions they finance indirectly through their corporate cash. By taking these actions, business can help the transformation of yet another crucial player – the financial sector.
Nigel Topping, UN Climate Change High-Level Champion at COP26
At Icebug, we have already started implementing the actions outlined in the guide and can see that we are contributing to improving our bank’s climate practice. We see a big potential for companies as bank customers to drive meaningful change in the financial sector.
James Varkey, CFO, Icebug
This guide is a valuable how-to for companies wanting to reduce the carbon emissions they indirectly finance. What’s more, it sheds light on the gaps when it comes to collecting data, recommends tools and standards that would enable companies to assess the climate performance of their financial partners more easily, and measures the emissions financed by corporate cash in order to take corresponding action to meet climate goals.
Brandi Halls, Chief Ethics Officer, Lush Cosmetics
Companies must act to decarbonize every component of their climate fingerprints, including their corporate finances. We’re excited about this action guide which provides every company the tools they need to start reducing the enormous emissions enabled by their corporate cash.”
Ashley Orgain, Chief Impact Officer, Seventh Generation
Our banking choices are an enormous lever for change, but it can feel a bit overwhelming to figure out where, how, and when to move to a more aligned bank partner (and to put positive pressure on your existing bank in the process). The Greening Cash Action Guide is an invaluable how-to that breaks it down so you can take action and become a powerful changemaker.
Kate Williams, CEO, One Percent for the Planet
Bankers and banking experts said:
We welcome all feed-back from our corporate customers that can help us in improving our climate-related initiatives. The practical support provided by this guide helps companies engage effectively with their banks and also ensures that banks who perform better on climate issues receive the positive feedback needed to accelerate and further develop their climate action.
Catharina Belfrage Sahlstrand, Chief Sustainability and Climate Officer, Handelsbanken
This guide is a valuable resource and must-read for business leaders who want to learn how to eliminate the oft overlooked carbon emissions from their company’s cash holdings. It offers practical steps for companies to measure and reduce these emissions, and it supports the decarbonization of the financial sector.
Aaron Morehouse, Executive Director, Climate Safe Lending Network