Banks vote to limit accounting of emissions in bond and stock sales

LONDON: Banks working to develop global standards on accounting for carbon emissions in bond or stock sale underwriting have voted to exclude most of these emissions from their own carbon footprint, three people familiar with the matter said.

The majority of banks comprising an industry working group backed a plan earlier this month to exclude two-thirds of the emissions linked to their capital markets businesses from being attributed to them in carbon accounting, the sources said, following months of discord over the issue.

If upheld, the decision would pit banks against environmental advocates, many of whom say the banking industry should assume full responsibility for the emissions generated by activities financed through bonds and stock sales, as it already does with loans.

Almost half of the financing provided by the six biggest US banks for top fossil fuel companies came from capital markets rather than direct lending between 2016 and 2022, according to environmental group Sierra Club.

Banks’ accounting of these emissions will impact their targets for becoming carbon-neutral. Major lenders have pledged to bring their emissions down to zero on a net basis by 2050, and have set interim targets for this decade.

Banks with big capital markets operations in the working group argued that they should assume responsibility for only 33% of the emissions of activities financed through bonds and stock sales because they do not have control over the borrowers as they do with loans. The banks have also expressed concern about capital market-related emissions dwarfing their lending-related emissions, the sources said.