As Net Zero Financial Institutions Raise Their Ambitions, They Shouldn’t Lose the Forest for the Trees

In Brief:

Financial institutions that specialise or focus their climate-related efforts too narrowly can see much more rapid diminishing returns on their efforts compared to those with a more systemic perspective. As an institution drills down into high-emitting sectors, they need to use what data are available to still consider how the rest of their customers’ activities could make decarbonisation more or less challenging.

Net Zero has quickly captured the attention of financial institutions and investors, but as the number of Net Zero pledges rises, expectations are rising that they should show a real economy impact. The lack of comprehensive data on emissions draws many financial institutions into focusing only on high-emitting sectors and try...