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Ethical Banking: Measuring the Impact of Investments on Climate

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Investing means supporting a company, which will have an impact on climate change, depending on the company and its commitment to environmental protection. So investing also means choosing whether and how much to contribute to climate change, depending on the company in which you invest.

Often, however, investors do not know the impact of their investments – and therefore cannot make a truly informed choice. The news coming from the world of ethical finance has, therefore, something revolutionary. The 54 banks of the Global Alliance for Banking on Values (GABV) have undertaken to measure and reduce the climate impact of their investments and loans over the next three years.

On the Path Marked Out By European Commission

This is the same idea behind the work that the European Commission has been carrying on for two years: defining and regulating sustainable finance to facilitate the transition to a low-impact economy.

The European Commission has already made it mandatory for large companies, banks and insurance companies to report on their impact on the climate, so as to speed up the transition to a low-carbon economy. In order to move to an economy with a low environmental impact, capital of about 180 billion euros per year is needed, according to the Commission. However, they should not be created out of nothing, but relocated, starting with existing capital, towards economic realities that have a lower risk of transition and that take better advantage of current opportunities.

Commitment of Ethical Banks

The leaders of the ethical banks belonging to the Global Alliance for Banking on Values (Gabv) have undertaken to carry out a joint effort to measure and reduce – over the next three years – the climate impact of investments and loans granted. They will do so through a technology developed by a group of Dutch banks and known as “Platform for Carbon Accounting Financials (PCAF)”. This system allows to calculate the greenhouse gas emissions generated by each bank’s portfolio of loans and investments.

The Gabv banks have also launched the initiative called “Climate Change Commitment” (3C initiative). The aim is to contribute to the concrete implementation of the Paris Accords, which in 2015 committed the signatory states to limit the increase in the average global temperature to below the threshold of 2°C above pre-industrial levels, and to limit this increase to 1.5°C. This is a necessary action to substantially reduce the risks and effects of the climate changes that are upsetting the planet.

Some countries have, in fact, already moved in this direction. France, for example, has for four years introduced a pioneering law on energy transition, according to which anyone managing investments must make a formal report on their environmental profile, i.e. provide information on the ecological footprint of the funds.

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