Financial Sector Guidance Webinar January 30, 2014...Julie Fox-Gorte Pax World Christopher Rowe...

www.unepfi.org www.ghgprotocol.org

Financial Sector Guidance Webinar

January 30, 2014

Cynthia Cummis WRI & Remco Fischer UNEP FI


• Background on GHG Protocol and UNEP FI

• History of the financial sector guidance project

• Current project scope

• Role of the TWGs

• Timeline and next steps

• Q&As

Agenda


Overview of the GHG Protocol

The Greenhouse Gas Protocol was launched in 1998 by

Multi-stakeholder collaboration of businesses, NGOs, governments and others

Vision:

Empowering the world to avoid and respond to climate change through the wide use of internationally accepted greenhouse gas standards and practices.

Mission:

GHG Protocol provides the foundation for comprehensive measurement and management strategies to reduce emissions and drive more efficient, resilient, and profitable businesses and organizations.

Corporate StandardCorporate Standard

Corporate Value Chain Corporate Value Chain

(Scope 3) Standard(Scope 3) StandardProject ProtocolProject Protocol

Product Life Cycle Product Life Cycle

StandardStandard

GHG Protocol Standards


Sector guidance is needed for the financial sector

The GHG Protocol Scope 3 Standard provides a framework for reporting emissions from lending and investing

o Barclays Capital

o Citi

o Credit Suisse

o Export-Import Bank of the U.S.

o IDB

o IFC

A financial sector workgroup was engaged in Scope 3 Standard development

o KFW Development Bank

o National Australia Bank

o PaxWorld Management LLC

o Sovereign


Summary of scoping process:

•Broad interest in better understanding, measuring and managing financed emissions

•Broad interest in the availability of a standardized methodology for measuring and reporting financed emissions

•Understanding ‘carbon risk exposure’ is the key driver to measure financed emissions

•The nexus between ‘financed emissions’ and ‘carbon risk exposure’ is not well understood

•Complexity and cost-benefit of measuring emissions varies widely depending on financing/investment activity

Results of a one year scoping process

Is measuring and reporting emissions associated with lending and investments an important business issue?

Workshops were held in New York and London, an online survey was conducted, and UNEP FI consulted with members


We have a number of tools in the Value Chain Standard already

• High level guidance for calculating GHG emissions from investments and lending

• List of third-party data sources to assist in emissions calculations (financial and process based data are available)

– Link to data sources page: http://www.ghgprotocol.org/Third-Party-Databases

• Calculation guidance with set of recommended methodologies for lending and investing


Governance structure

Convening Secretariat

UNEP FI & GHG Protocol

Convening Secretariat

UNEP FI & GHG Protocol

Advisory Committee

UNEP FI & GHG Protocol, key businesses, government, accounting firms, and

NGOs

Advisory Committee

UNEP FI & GHG Protocol, key businesses, government, accounting firms, and

NGOs

Technical Working GroupsTechnical Working Groups

1. Companies &

Projects

1. Companies &

Projects 2. Governments2. Governments 3. Consumers3. Consumers 4. Cross Cutting

Issues

4. Cross Cutting

Issues5. Carbon Asset

Risk

5. Carbon Asset

Risk

Stakeholder Advisory

Group (Open to all)

Financial Institutions,

NGO’s, industry analysts,

accountants, governments,

consultants

Stakeholder Advisory

Group (Open to all)

Financial Institutions,

NGO’s, industry analysts,

accountants, governments,

consultants

Potential

Subgroups

Potential

SubgroupsPotential

Subgroups

Potential

SubgroupsPotential

Subgroups

Potential

SubgroupsPotential

Subgroups

Potential

SubgroupsPotential

Subgroups

Potential

Subgroups


Advisory committee Advisory Committee

Member NameOrganization

Stanislas Dupre 2 Degrees Investing Initiative

Karsten Loeffler Allianz Group

Julian Poulter Asset Owners Disclosure Project

Daniel Marroquin Banamex

Kaj Jensen Bank of America

Christopher Bray Barclays

Mark Campanale Carbon Tracker Initiative

James Hulse CDP

Sabine Miltner Deutsche Bank

Chris Walker EY

Nick Robins HSBC

Tom Kerr IFC

Nathan Fabian Investor Group on Climate Change (IGCC)

Bill Harnett Local Government Super

Steve Priddy London School of Business and Finance

Julie Fox-Gorte Pax World

Christopher Rowe Prudential Investment Management

Cory Weiss PwC

Sefton Laing RBS

Richard Pearl State Street

Giorgio Capurri Unicredit

Robyn Luhning Wells Fargo

Tim Hassett WWF US

Namita Vikas YES Bank

Jochen Harnisch KWF


Two guidance documents will be produced in parallel

TWG 1: Companies and

Projects

Chair: Eliza Eubank, Citi

TWG 1: Companies and

Projects

Chair: Eliza Eubank, Citi

TWG 2: Governments

Chair: Magnus Borelius, City of

Gothenburg

TWG 2: Governments

Chair: Magnus Borelius, City of

Gothenburg

TWG 3: Consumers

Chair: Myriam Cisneros Molina,

Sociedad Hipotecaria Federal

TWG 3: Consumers

Chair: Myriam Cisneros Molina,

Sociedad Hipotecaria Federal

TWG 4: Cross-cutting

Issues

Chair: Emma Herd, Westpac Institutional

Bank

TWG 4: Cross-cutting

Issues

Chair: Emma Herd, Westpac Institutional

Bank

Accounting Guidance Carbon Asset Risk Guidance


Four principal objectives of the accounting guidance

1. Provide a credible and internationally-harmonized GHG standard for financial intermediaries (FIs) to measure, report, and track performance

4. Guide the external readers of reported information on how disclosed information can and cannot be meaningfully used

2. Guide FIs on the internal interpretation and use of the data

3. Create an understanding of how financed emissions are linked to carbon risk exposure


Four principal objectives of the Carbon Asset Risk (CAR) guidance

1. Identify the types of financial risks that can result from the GHG emissions / intensity / exposure of ‘carbon assets’ - projects or companies with high exposures to present and future GHG emissions

2. impact future business decisions or investments in carbon assets --projects or companies with high exposure to GHG emissions

4. Provide guidance on effective and appropriate strategies that financial institutions and investors could pursue to manage potential risk

3. Provide actionable approaches to help financial institutions and investors evaluate the presence and degree of potential risk associated with carbon assets

2. Provide insight on how these risks are typically distributed across different types of capital associated with a carbon asset


Structure of the accounting guidance

PART I: General Information

PART IV: Governments

PART VII: Interpreting Data

PART II: Key Accounting Concepts

PART V: Consumers

Appendices

PART III: Companies & Projects

PART VI: Tracking & Reporting

Notes

1. Introduction2. Business Goals3. Accounting & Reporting

Principles4. Accounting & Reporting

Recommendations

5. Key Concepts6. Collecting Data

7. Accounting Guidance by Investment and lending type for companies and projects

8. Accounting Guidance by Lending Type

9. Accounting Guidance by Lending Type

10.Setting GHG Reduction Targets and Tracking Emissions Over Time

11.Developing & Using Performance Metrics

12.Reporting Guidance

13.Data Interpretation by Internal Users

14.Data Interpretation by External Users

15.Avoided Emissions (inclusion TBD)

16.Potential Future Emissions from Fossil Fuel Reserves (inclusion TBD)

17.Abbreviations18.Glossary19.References20.Recognitions

TW

G 1

TW

G 1

TW

G 2

TW

G 2TW

G 3

TW

G 3


Structure of the CAR guidance

Phase 1Phase 1

Phase 2Phase 2

Introduction, Objectives

and Scope

Mapping an asset’s

sources of capital (i.e.,

the “capital stack”) and

discussion of how risk is

typically distributed

across different types of

capital

Types of potential risks

associated with carbon

assets

Key factors to consider

when assessing the

presence and degree of

potential risk associated

with carbon assets

Mapping the carbon

intensity of different

sectors and identifying

those that are most

exposed to potential risk

Approaches that

financial institutions and

investors can use to

evaluate potential risks

associated with carbon

assets

Strategies that

financial institutions

and investors can

pursue to manage

potential risk

Mining, Oil and Gas, Power, etc.

Part 1 Part 2 Part 3

Part 4 Part 5 Part 6

Part 7

Sector based guidance


Date Project Phase

Feb 2014 Launch TWG Process

Sept 2014 First drafts completed

Oct – Feb 2015 First public comment phase and road testing

Mar – May 2015 Review comments and revise draft guidance

Jun – Jul 2015 Second public comment period

Aug – Oct 2015 Final round of revisions based on feedback, review and sign off

Nov – Dec 2015 Copy editing, design and publication

Jan 2016 Publication

Jan 2016 onwards Outreach

Project timelines


Roles and responsibilities of TWG’s and next steps

• For the set of technical accounting issues designated to the group:

• Review relevant existing methodologies and practices;

• Analyze the issues and challenges; and

• Develop recommendations around content of guidance

• Draft sections of text on the designated topics and review draft text at

frequent intervals

• Seek and respond to feedback on draft chapters from the Advisory

Committee and public comment process

Responsibilities

Technical working group members are requested to make a two year

commitment to participate in the guidance development (i.e., early 2014 –

late 2015). This is expected to involve:

•2 conference call of 90 minutes each per month in 2014 and occasional calls

in 2015

•1 in person meeting in 2014 and 1 in person meeting in 2015 (if needed)

•The necessary time to prepare and review materials (5-10 hours per month

in 2014)

Commitments

You will be hearing from your TWG Chair soon with details on your first call (likely mid Feb)


Thank you for your participation!This effort would not be possible without your support

Cynthia Cummis WRI

[email protected] Fischer UNEP FI

[email protected]


Q&A

Financial Sector Guidance Webinar January 30, 2014...Julie Fox-Gorte Pax World Christopher Rowe...

Documents

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