More than half of the financial institutions that have signed the Commitment to the Dutch Climate Agreement already report on the CO2 impact of their financing and investments. Gaining insight into the carbon footprint is an important step towards reducing emissions in line with the Paris Agreement’s goal to limit global warming to well below 2 degrees Celsius.
The Dutch financial sector is thus on track to meet one of the commitment’s key obligations, according to the first report of the Financial Sector Climate Commitment Committee. In response to the report, the Dutch minister of Finance Wopke Hoekstra wrote he is pleased to see that Dutch financial institutions are worldwide leaders in this area.
The report was prepared by consultancy firm KPMG and accompanied by a carbon impact reporting framework as well as an overview of current measurement methods in the Dutch financial sector. APG contributed to these documents by providing expert advice.
Sharing experiences
“It is important to combine various parties’ experiences with measuring the climate impact of investments, says Joost Slabbekoorn, responsible investment specialist at APG. ‘In this way we learn from each other and work towards a methodology that is transparent and verifiable. This is essential to establish trust and, ultimately, to make a contribution to the Paris climate goals.”
Worldwide, 57 financials have now adopted the PCAF carbon accounting methodology, of which APG, together with other Dutch financial institutions, is a founding member. While Dutch financial institutions are leaders in this area, the report also shows there is still a long way to go towards comparable standards and targets. The main challenges are methodological differences between impact measurement methods, the limited availability of high-quality data and potential understatement of the importance of engagement with investees.
Expanded scope
APG and its clients have been reporting the carbon footprint of listed equity since 2015; all clients have CO2 reduction targets for their equity portfolios. ABP earlier this year announced its new reduction target of -40 percent in 2025 (compared with 2015). Starting with the 2020 reporting cycle, we will extend the scope of these disclosures to include corporate bonds, real estate and private equity (representing over half the assets under management). The objective is to allow clients to set 2030 Paris-aligned climate targets no later than 2022.
The financial sector’s commitment to the Dutch climate agreement goes beyond merely reducing the carbon footprint of the investment portfolio. Slabbekoorn: “As a large investor, we have a broad set of tools at our disposal to drive lower emissions in the real world. This includes engagement, also together with other investors, to encourage the companies we invest in to reduce carbon emissions and investing in climate solutions, such as renewable energy and carbon saving technology.”