‘Climate-safe banking’: New guide targets indirectly financed emissions from cash holdings

A new guide has set out how business leaders, chief financial officers and sustainability managers can slash emissions generated through their corporate cash holdings and help accelerate the wider decarbonization of the financial sector.

“The Greening Cash Action guide: How to reduce emissions from companies’ cash deposits in the bank” details how many businesses are failing to account for the emissions associated with their corporate cash holdings, warning that these indirect emissions are likely to result in a substantial increase in many businesses’ carbon footprint.

As such, the report — authored by Johan Falk of the Exponential Roadmap Initiative, Jakob König from the Fair Finance Guide and Swedish Consumers’ Association, Paul Moinester of TOPO and Allison Fajans-Turner from BankFWD — sets out seven actions companies can take to both first assess and then curtail emissions associated with how banks manage their corporate cash holdings.

Specifically, the report advises firms to take steps to calculate the carbon footprint from cash holdings and proactively engaging with banks to encourage better data disclosure.

It also urges businesses committed to achieving net-zero emissions to leverage their position as major corporate customers to call on banks to reduce the carbon intensity of their loan and investment portfolios.

Falk, CEO and co-founder of the Exponential Roadmap Initiative, said companies must face up to the responsibility of reducing emissions along their full value chain, including direct and indirect financial operations.

“This guide gives practical and actionable recommendations how to measure and reduce the emissions they indirectly finance through their cash holdings in the bank,” he said.

König said corporate clients could play a critical role in ensuring banks develop more credible and effective decarbonization strategies. “What banks choose to finance is key for the climate transition,” he said. “With this guide, corporate clients can help to accelerate their banks’ transition and in turn, banks have an opportunity to add value for their clients. It’s a clear win-win that benefits the climate.”

Allison Fajans-Turner, managing director at BankFWD, claimed that companies committed to driving down emissions have left a “major lever on the table” when it comes to tackling financed emissions. “Namely, their power and influence on banks as major clients,” she explained. “By using this guide, companies can take steps to ensure that the banks that get their business are using company cash in ways that support and don’t undercut a company’s wider climate goals.

“This guide will help to cement climate safe banking as a new pillar of corporate sustainability and net zero planning.”

According to the guide’s authors, companies are not yet required to report emissions from corporate cash holdings as the relevant Greenhouse Gas Protocol’s Scope 3 guidance only applies to financial institutions and investors. But as climate disclosure and reporting standards are strengthened, it is possible that companies will be required to account for emissions associated with their cash holdings when reporting on their Scope 3 value chain emissions.