Split delays carbon accounting plan on banks’ capital market deals – sources | – #Split #delays #carbon #accounting #plan #banks #capital #market #deals #sources

SummaryCompanies Capital Markets Issuance Accounting Deal DelayedSome Deal Related 10They don’t want to order 0% emissions, it’s hard to track banks’ climate progress without an agreement.

LONDON, March 24 (Reuters) – Banks are at odds over how to calculate the carbon emissions associated with capital markets, sources told Reuters, with some 10They are unhappy with the proposal that 0% will be attributed to them. financial instruments.

The entire industry methodology was due to be announced in late 2022, but four sources with direct knowledge of the process said each bank by said the deal was stalled by a dispute over how much carbon emissions to order.

The deal is seen as an important step for the financial industry as pressure mounts on it to help the transition to net zero, with a study by United Nations scientists this week calling for a rapid phase-out of fossil fuels.

Without a methodology in place, investors are hampered in tracking individual banks’ carbon footprints, which are an increasingly important part of their shareholder payouts.

Most banks still do not include emissions related to deals known as “facilitated emissions” in their targets, making it difficult to track their progress towards their pledge to reach net zero emissions by 2050.

Currently, many banks’ emissions reduction commitments apply only to their financed emissions.

But between 2016 and 2021, oil and gas 57% of the financing given to the first 50 companies expanding their production was done through capital markets underwriting.

“Easily issued is a way of financing the operations of some of the heaviest emitting sectors, and while banks may not have as much influence as they do in lending, they still have influence,” said Dan Saccardi, director of the non-profit organization Ceres. focuses on sustainable capital markets.

‘SOMEWHERE IN THE MIDDLE’

Morgan Stanley, Barclays, Citigroup, Standard Chartered, HSBC and Britain’s NatWest are members of a working group discussing next steps as part of the Industry Partnership for Carbon Accounting Finance (PCAF).

NatWest, supported by climate activist groups, eased emissions 10It is pleased that 0% is attributed to the banks behind the capital markets deals.

Bank states that Basel Bank 17% alternative derived from the Supervisory Committee’s Global Systemically Important Banks assessment methodology offer is problematic.

Tonia Plakhotniuk, Vice President of Climate and ESG Capital Markets at NatWest Markets, said 17% was at risk of “mismatch” because investors would not calculate the rest themselves.

It is “a very subjective assessment to gauge the role of the underwriter,” he said, adding that “more information, research or analysis” is needed to reach an agreement.

Those in favor of a lower stake argue that unlike corporate loans, a bond or stock sale is a single transaction and banks have less leverage to change customer behavior.

“100% is too high,” an executive at a major bank involved in the talks told Reuters. We will have to meet somewhere in the middle, but I don’t know where.”

PCAF spokesman Evan Bruner said the group continues to “work toward a final method” but had no update on progress.

‘ACCOUNTING ARBITRATION’

Several banks have started using their own methodology.

This includes Barclays, which allocates 33% of its capital markets funding to the bank and the rest to investors.

Barclays did not respond to a request for comment.

Other banks in the task force either declined to comment or did not respond to requests for comment.

Reuters graphics

Until the banks agree on a compromise, experts say lenders may order more business like capital markets rather than loans.

“Accounting standards must make sure that emissions are measured in banking products and that there is no accounting arbitrage,” said Baringa consultant Simon Connell and former head of sustainability strategy at Standard Chartered.

The Basel Committee’s Global Systemically Important Banks assessment methodology considers direct lending six times more important in terms of impact on the financial system than capital markets underwriting.

PCAF uses this in its formula to arrive at the 17% option.

Reporting by Tommy Reggiori Wilkes and Virginia Furness; Graphics by Vincent Flasseur; Edited by Simon Jessop and Alexander Smith

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2023-03-24 22:58:55
Source – reuters

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