How banks advanced their emissions disclosures in 2023

December 26, 2023 6:02 PM

The U.S. banking industry continued to expand its voluntary disclosures in connection with climate change this year ahead of new regulations that are expected to be announced in 2024.

Banks and credit unions are making more climate-related disclosures in advance of long-awaited rules from the Securities and Exchange Commission, which are now expected in April. The industry is also facing pressure from shareholders who want action on climate change. And there's growing recognition within the industry about the risks that climate disasters pose to loan portfolios.

New disclosures at certain banks this year included measurements of both "absolute" emissions and "intensity" emissions, as well as new details on difficult-to-calculate Scope 3 emissions, which measure the carbon footprint of a bank's value chain and financing activities.

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While the largest U.S. banks' disclosures in 2023 could set new industry standards, certain smaller institutions also improved their climate reporting. Here's a look at how some banks expanded their voluntary disclosures this year.

Citigroup

Citigroup's latest disclosures have contributed to an emerging debate over the measurement of "absolute" emissions versus "intensity" emissions.

Absolute emissions measure the exact volume of emissions that a company is producing, while intensity emissions measure the efficiency of the process that generates the pollutants.

As the industry has moved toward standardizing climate disclosures, activists have scrutinized banks for making disclosures based on varying measurements and datasets.

In Citi's 2023 emissions disclosures, which are based on recommendations from the Task Force on Climate-related Financial Disclosures, the megabank committed to reducing 90% of its absolute emissions from exposure to the coal-mining industry by 2030.

Also in 2023, Citi used data from its exposure to the oil and natural gas sector in 2020, along with data from its 2021 financial statements, to calculate a 30% decline in its absolute emissions. The New York bank reported a slight increase in oil-and-gas intensity emissions.

JPMorgan Chase

The largest U.S. bank by assets provided additional disclosures that allow for the comparison of varying measurements of emissions.

One step that JPMorgan took in its 2023 climate report was to update its definition of "energy mix" emissions to include the oil-and-gas sector as well as financing for clean energy. The updates helped to show how the bank's activities in clean energy finance compared with its fossil-fuel exposure.

JPMorgan also updated its interim 2030 reduction target to 36%, based on a 2019 baseline. The bank said that the changes reflect its belief that a singular focus on fossil fuels isn't going to achieve what's necessary for a global energy transition.

JPMorgan also made disclosures about both its absolute emissions and its intensity emissions. However, it did not set emissions-reduction targets based on absolute measurements.

Berkshire Bank

Massachusetts-based Berkshire Hills Bancorp, which emphasizes its support for environmental and social initiatives, detailed how its banking unit plans to use the proceeds of a $100 million sustainable bond issuance.

In its Sustainability Bond Report, the $12.3 billion-asset parent company of Berkshire Bank stated that proceeds from the issuance were used to help finance the development of 330 units of affordable and workforce housing, as well as 200,000 square feet of green building development in communities across New England and New York.

Berkshire says that it was the first financial institution with less than $150 billion of assets to issue $100 million in sustainability bonds in 2022. The goal was to use the bond's proceeds to finance or refinance environmental and social projects.

More specifically, Berkshire said it would use the proceeds to finance the generation of renewable electricity, green buildings, energy efficiency upgrades and affordable housing.

Detailing how the proceeds of sustainability bonds will be used could become commonplace, as banks increasingly capitalize on product offerings that cater to clients seeking to invest capital in initiatives that support the environment.

Huntington Bank

Huntington Bank continued to work toward commitments it made in 2022 to expand its disclosures about certain categories of emissions.

The banking unit of Columbus, Ohio-based Huntington Bancshares detailed new efforts to mitigate its operational energy use, lower its waste consumption and adopt renewable energy sources.

The regional bank also completed an initial calculation of its Scope 3 financed emissions, based on the industry framework established by the Partnership for Carbon Accounting Financials.

In Huntington's latest emissions report, the bank committed to reducing 35% of its overall exposure to direct and indirect emissions by 2030, while also pledging to develop long-term plans to reduce emissions by 2050.