Norway’s $1.9 Trillion Wealth Fund Calls Out Banks Over Emissions Reports | Company Business News

(Bloomberg) — Norway’s $1.9 trillion wealth fund says global banks need to start telling investors how much of their revenue is being omitted from CO2 emissions reports.

Norges Bank Investment Management, the world’s largest sovereign-wealth fund, wants banks to begin accounting for the full scope of the emissions they enable through services such as loans and the underwriting of bonds.

With the vast majority of banks not reporting the carbon footprint of their capital markets business, “investors need to know the potential magnitude of excluded emissions,” Jeanne Stampe, lead policy adviser for NBIM, said in an interview. 

If banks disclosed “the revenues or amounts associated with such exclusions,” then investors would get “a sense of the relative contribution of excluded activities,” she said.

The comments show the determination of major asset owners in Europe to include climate risk in their investment decisions, despite pushback in some jurisdictions. In the US, the Trump administration has vilified goals such as net zero emissions, which has coincided with a mass retreat by Wall Street banks from the main industry alliance dedicated to net zero. 

Since the Paris climate agreement was struck at the end of 2015, global banks have provided $6.3 trillion of loans and bonds to the fossil fuel industry, with Wall Street’s biggest lenders far ahead of their European peers, according to data compiled by Bloomberg. At the same time, the planet may now be on track for warming of 3.1C by the end of the century, as high-carbon industries continue to release emissions into the atmosphere.

Scientists have warned that temperature increases of that magnitude would lead to key tipping points being breached, opening the door to potentially irreversible consequences.

NBIM, which invests close to 11% of its total equity holdings in financial firms including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., is now throwing its weight behind a proposal from the International Sustainability Standards Board that would give investors a better sense of how big finance-sector emissions really are.

ISSB, whose standards are in the process of being adopted by jurisdictions representing about 60% of the global economy, is proposing that banks disclose how much of their business is excluded from the emissions data they provide. The plan also applies to insurers, which often limit their emissions calculations to investments while leaving out those associated with insurance underwriting.

Banks and insurers responding to an ISSB consultation have voiced opposition to the proposal, arguing that a “clear link” to underlying emissions can be hard to establish, especially when trying to deal with products such as derivatives. Such disclosures may even be misleading, they suggest. 

Sue Lloyd, ISSB’s vice chair, said she’s aware that there’s resistance from within the industry. However, the ISSB proposal is designed “so that investors have got some sense of the magnitude of the business that is excluded” from banks’ emissions reporting, she said. If the proposal succeeds, then “at least we’ve got a signal of how big a gap” there is in measuring actual emissions.

ISSB targets having a decision by the end of this year, Lloyd said.  

Studies show that capital markets activities make up the lion’s share of global banks’ funding of oil, gas and coal. A June report by a group of nonprofits found that bond financing was responsible for most of last year’s $162 billion increase in fossil fuel financing.

There have been industry-led attempts to help banks report their facilitated emissions, including the Partnership for Carbon Accounting Financials. But these have yet to result in any industrywide reporting commitments.

Giel Linthorst, climate lead at ING Groep NV and former executive director at PCAF, said that like much of sustainability reporting, disclosing facilitated emissions is difficult but not impossible. “The actual calculations aren’t complex,” he said. 

Excluding facilitated emissions “will cause a significant loss of useful information which is required to address the climate problem,” said Angelica Afanador, PCAF’s executive director. “It’s not easy” but “that isn’t an argument for delay.”

On Wall Street, banks say they’re looking into how best to proceed.

At Bank of America Corp., the incorporation of facilitated emissions in its 2030 targets continues to be evaluated, a spokeswoman said. Spokespeople for Morgan Stanley, Goldman Sachs, Wells Fargo & Co., Citigroup and JPMorgan declined to comment, pointing instead to their published statements regarding climate policies. 

Morgan Stanley referred to its 2023 ESG report, in which it says it will include capital markets in emissions disclosures “over time.” Goldman Sachs’ 2024 Task Force on Climate-Related Disclosures report limits emissions reporting to its asset and wealth management business. Citigroup has included facilitated emissions for three industries — carmakers, energy and power — in its 2030 emission reduction targets, according to the bank’s 2024 annual report. JPMorgan reported facilitated emissions in its 2024 climate report. Wells Fargo announced in February it was abandoning its goal for net zero financed emissions by 2050. 

Morgan Stanley, Barclays Plc, Bank of America and Citigroup are members of PCAF meaning they’ve in principle committed to disclosing emissions, according to the organization’s website. Goldman Sachs and Wells Fargo aren’t members.

–With assistance from Stephen Treloar.

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