Persefoni + PCAF: Helping Financial Institutions Calculate and Analyze Financed Emissions
Persefoni has incorporated the new financed emissions standards developed by Partnership for Carbon Accounting Financials (PCAF) into its award-winning carbon accounting platform. This is a significant step forward because it enables banks, asset managers, and asset owners to understand the carbon impacts of their investment and lending activities using globally accepted practices. Even more significant, with this information, the financial services industry can align its capital with the goals of the Paris Climate Accord - ratified by all nations of the world.
PCAF is a global partnership of more than 100 financial institutions (e.g., Bank of America, Citibank, and Morgan Stanley) collectively managing more than $38 trillion in total assets. Working with climate-oriented nonprofits, this coalition developed a consensus approach to assess and disclose the carbon impacts associated with their loans and investments. As an open-source accounting standard, it enables transparency, comparability, and accountability for the carbon impacts of financial transactions.
For example, when a bank lends money to a business the loan may be supporting new projects that has carbon impacts. The PCAF standard provides a method for the bank to understand, and importantly - manage, the carbon associated with its loans. The PCAF standard includes allocation formulas for the carbon associated with financial transactions in six asset classes including listed equity and bonds, mortgages, business loans, motor vehicle loans, project finance, and commercial real estate.
While the details are technical, the implications are monumental. Banks, asset managers, and asset owners typically emit very little direct greenhouse gas from their own operations. By far, their biggest climate impact – and opportunity to improve – is through their lending and investing activities. A recent report from the climate nonprofit CDP (formerly the Climate Disclosure Project) revealed that greenhouse gas (GHG) emissions associated with financial institutions investing, lending, and underwriting activities are more than 700 times higher than the emissions from their own operations. By understanding the climate impact of their investments, the financial services industry will be able to align capital to sustainable business practices – funding the transition to a low-carbon economy.
Financial services firms make millions of transactions per year involving a myriad of companies and industrial sectors. Without state-of-the-art information technology encoding the PCAF standard, it’s impossible to account for the carbon impacts of these transactions. Persefoni is the first SaaS (software as a service) platform to encode the PCAF standard. With this new feature, the Persefoni AI platform enables the finance sector to join the global fight against the worst effects of climate change.
Persefoni Co-Founder and CEO, Kentaro Kawamori said: “Once the PCAF standard was launched it was clear we needed to make financed emissions capabilities available to the market as quickly as possible. Though only recently launched, we’re already working with many of the world’s largest banks, asset managers, and asset owners. Sustainable Finance and ESG teams especially are looking not just to calculate but analyze the footprint of their investment and lending portfolios and we enable them to do it upwards of 10x faster than they otherwise might have been able to.”
Former CEO of the Global Reporting Initiative and Persefoni CSO, Tim Mohin added: “After decades of working to solve sustainability issues from inside some of the world’s largest companies, this changes everything. The information generated by this platform will divert capital flows from the old fossil-fueled economy to the low carbon economy we need to sustain this planet.”
“After a successful career on Wall Street and working with some of the best talents in the industry, I now spend a lot of my time helping Sustainable Finance and ESG teams, as well as C suite executives and directors at many of the world’s leading firms, navigate carbon and climate considerations. Not surprisingly, these considerations affect the capital allocation, M&A, cost of capital, investor relations, profitability, and compensation, amongst others. Innovations, such as the financed emissions capabilities within the Persefoni platform, are critical for these teams to be able to quickly and effectively understand the climate impact of their investment and lending activities.” – Marc Zenner, former Managing Director & Global Group Co-Head, Corporate Finance Advisory, Investment Banking Division, JPMorgan Chase & Co. and Strategic Advisor at Persefoni.