Most of the world’s largest banks have committed themselves to becoming net zero across all their activities, yet only 12% of banks are currently on track to reduce their own Scopes 1&2 emissions (from their own operations) by their net zero target date of 2050. What’s more, these emissions are just a small fraction of the total emissions for which banks are accountable. Addressing their Scope 3 financed emissions—helping their customers and the companies they have invested in to curb greenhouse gas emissions—will have a much greater impact on the banks’ progress towards net zero. These financed emissions represent more than 95% of the average bank’s overall emissions.
Measuring and reducing Scope 3 emissions, over which banks have no direct control, will be a huge challenge. Yet, it is a challenge that lies at the heart of the banks’ potential role as stewards of the transition to a net zero economy. Unless banks quickly master the preliminary stages of their own transition to net zero and, simultaneously, get to grips with their financed emissions, they are likely to fall short of their commitments and miss out on a historic opportunity to broaden and grow their businesses.