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Understanding Financed Emissions Reporting

Did you know your investments have a carbon footprint? Discover the significant yet often overlooked world of financed emissions.
TL;DR Embed
TL;DR: Financed emissions are the greenhouse gases emitted as a result of a company's investment activities. Crucial for corporate sustainability, these emissions often represent a larger part of a firm's environmental impact than direct operations. The article discusses the challenges businesses face in reporting financed emissions, such as complex measurements and evolving standards. It emphasises the importance of understanding and managing these emissions for regulatory compliance, risk management, and maintaining investor and consumer trust.

Financed emissions reporting has emerged as a vital aspect of sustainable practices. As businesses strive for transparency and accountability in their environmental impact, understanding and managing financed emissions is becoming crucial. However, the concept of financed emissions, while critically important, is often a new territory for organisations. Many find themselves uncertain about where to start or how to effectively integrate this aspect into their sustainability framework. This article aims to shed light on the concept of financed emissions, explain its importance in the broader context of sustainability, and show businesses how to start or revolutionise their journey.

What are Financed Emissions?

Financed emissions refer to the greenhouse gas (GHG) emissions associated with the investment and lending activities of financial institutions. In simpler terms, these are emissions indirectly caused by a company through its financial investments in other companies or projects. These can include investments in industries such as fossil fuels, manufacturing, and transportation, among others.

Why are Financed Emissions Important?

Extended impact beyond direct operations

Unlike direct or even indirect emissions from a company’s own operations, financed emissions often represent a larger share of a financial institution's carbon footprint. They extend a company's environmental impact beyond its immediate operational boundary.

Regulatory compliance and reporting standards

With the rise of global awareness and regulations surrounding climate change, such as the Task Force on Climate-related Financial Disclosures (TCFD), companies are increasingly required to report on their financed emissions.

Investor and consumer expectations

There's a growing expectation from investors and consumers for companies to be responsible for their financed emissions. Transparent reporting can enhance corporate reputation and trust.

Strategic risk management

Understanding financed emissions helps companies in managing risks associated with climate change and transitioning to a low-carbon economy.

Challenges in Reporting Financed Emissions

One of the major challenges in reporting financed emissions lies in the complexity of measurement and attribution. Determining the exact amount of emissions that are financed by a company's investments is difficult due to the indirect nature of these emissions. This complexity is compounded by the lack of standardised methodologies in the field, making it challenging for businesses to ensure that their reporting is both accurate and in line with current expectations and regulations.

Introducing FutureTracker’s Financed Emissions Solution

As part of our comprehensive suite of sustainability tools, FutureTracker presents a robust Financed Emissions Solution. It’s easy to use and has extensive data sets and powerful tools tailored for managing portfolio emissions.

  • Alignment with industry standards: The platform aligns with major standards like PCAF, TCFD, and SFDR, ensuring compliance and relevance.
  • Comprehensive emissions data warehouse: Offers full visibility into emissions calculations, aiding in accuracy and transparency.
  • Flexible analytics and data framework: The solution is designed to support GHG reduction goals, improving data quality scores and increasing asset coverage.
  • Management of methodological uncertainty: FutureTracker aids in controlling regulatory and reputational risks, as well as minimising impacts on portfolio structure.
  • Empowering sustainable investment decisions: With FutureTracker, organisations can make informed decisions that align with their sustainability objectives.

Financed emissions reporting is not just a regulatory requirement but a strategic imperative in today's world. Understanding and managing these emissions are key to a holistic approach to corporate sustainability. FutureTracker’s Financed Emissions Solution empowers organisations to navigate this complex area with confidence, backed by expert support and cutting-edge technology. Embrace the journey towards sustainability with FutureTracker, your partner in effective and impactful environmental stewardship.

If you’d like to learn more, book a no-strings-attached demo here.

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