Banking Industry
Today, climate change and environmental issues are seen as serious global threats. In this context, the responsibilities of financial institutions, especially banks, regarding environmental sustainability are increasing. Carbon management in the banking sector is of great importance in achieving environmental sustainability, combating climate change, and managing financial risks.
Challenges Faced by Banks in Carbon Management
Three main challenges shape the efforts of banks in the field of carbon management:
- Accurately Determining Emissions: Banks need effective methods and data providers to accurately identify and measure emissions in their credit portfolios and other financed portfolios. Existing requirements allow banks to understand their current carbon footprint and progress and develop appropriate strategies to reach future goals.
- Discovering Areas Where Climate Transition Creates Value: Banks require an analytical and strategic approach to determine where and how climate transition creates value. Understanding how investments and financing related to sustainability will be valued is important for making the right investment decisions and not missing climate-related opportunities.
- Long-Term and Sustainability-Focused Strategy Discipline: Banks need to learn to act with a long-term perspective to achieve carbon management and climate neutrality goals. This involves aligning financial decisions with sustainability objectives, reducing risks, and considering future environmental and social impacts. Sustainability should be a fundamental element in the strategic planning and business models of banks.
Banks that start the transition to a zero-carbon economy earlier and increase their efforts will have better financial stability compared to banks that hesitate in committing to climate-related goals. This demonstrates that sustainability and carbon management strategies have a positive impact on the financial performance of banks.
Financed Emissions
Financed emissions represent a significant portion of a bank's total carbon footprint, while emissions from a bank's own operations constitute a smaller proportion. Therefore, it is important for banks to actively involve their customers in carbon reduction efforts to fulfill their commitments. Encouraging more sustainable consumption while preparing their current operations for the future offers banks a way to avoid climate-related risks.
Why Carbon Management is Important for Banks?
Carbon management is crucial for banks in terms of environmental sustainability, climate change mitigation, and financial performance. The following are key reasons:
- Sustainability Commitment: Embracing environmentally friendly practices signals a commitment to sustainability and demonstrates to customers, investors, and society that banks are environmentally conscious.
- Combating Climate Change: Banks can contribute to combating climate change by reducing greenhouse gas emissions from their own operations and the financing they provide to customers.
- Risk Mitigation: Climate change and environmental risks pose significant threats to bank portfolios and asset values. Carbon management helps banks reduce financial risks.
- Customer Demand: Consumers and corporate clients increasingly demand eco-friendly products and services. Banks can enhance customer satisfaction by meeting these demands.
- Compliance with Future Regulations: Many countries are introducing legal regulations on reducing and reporting environmental impacts for companies operating in the financial sector. Banks can take measures now to comply with future regulations.
- Green Finance and Investments: Green finance and sustainable investments represent a potential growth area in the coming years. Banks can leverage opportunities by providing financing for eco-friendly projects.
We are here to support banks on their journey to net-zero. Our platform offers powerful analytics and data provision features to help banks accurately calculate and report emissions in their credit portfolios and other financed portfolios, in addition to their operational emissions. With our developed banking network module, we make it easier for banks to track the carbon footprint of their customers in their portfolios.
Resources
Industry
Reporting
Headquarter: Merdivenköy Mh. Nur Sk. A Blok K:12 D:115 Business, 34730 Kadıköy/İstanbul
R&D Center: Bilişim Vadisi, Muallimköy Mah. Deniz Cad. No: 143/8 C1 Blok Zemin Kat Kapı No: Z01 Gebze/Kocaeli