• Thu. Apr 18th, 2024

New Report Helps Companies Stop Bankrolling Climate Change

‘Carbon Bankroll 2.0’ illuminates the huge, untapped climate impact of the US
financial system — how it is undermining leading companies’ climate action, and
why companies’ financial management may be their greatest lever for climate
progress.

Companies have historically thought of their banking and investing as a
climate-neutral activity, but as Topo
Finance
’s new report reveals, their
financial management may be both their largest source of emissions and their most
powerful lever for climate action.

The Carbon Bankroll 2.0: From Awareness to
Action
, which builds on the
illuminating research published in 2022’s The Carbon Bankroll
1.0
, reveals that these
overlooked emissions are larger and more ubiquitous than previously reported. As
a result, companies have an even greater responsibility and opportunity to
leverage their financial management to drive exponential emissions reduction.

“Since we published Carbon Bankroll 1.0, a growing wave of companies and
institutions have made their financial management a cornerstone of their
sustainability work and are driving real impact,” said Topo Executive Director
Paul Moinester and Sustainable
Finance Initiatives Lead James
Vaccaro
, who co-wrote both reports.
“As organizations start taking action, it will be those banks aligning with
climate goals that will be the finance partners for a sustainable future —
whereas those not making the necessary change will see themselves left behind by
their customers.”

Launched in 2018 as The Outdoor Policy Outfit (TOPO), a think tank
focused on galvanizing the outdoor community into a united movement that could
mitigate climate change and create a more just world, the organization evolved
its mission and rebranded in late 2023 as Topo Finance — a nonprofit
dedicated to transforming the financial sector into a powerful force for creating
a more just, regenerative world — which conducts research and
develops pragmatic solutions that enable all organizations and individuals to
maximize the positive impact of their finances.

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As corporate sustainability commitments have become table stakes and companies
gain more and more control over their supply
chains, awareness is
finally growing around the disconnect between these commitments and a company’s
actual impacts — thanks to a historic opacity around the impact that corporate
cash has on supporting the fossil fuel industry, which undermines sustainability
efforts by continuing to fuel climate
change.
In recent years, more effort is being made to follow corporate investment money
paid to
insurance
and employee
401(k)
and pension
funds
,
to see where well-meaning investments may be having the opposite effect.

Treasurers regularly engage with their financial partners to conduct due
diligence and ensure their money is safely deposited with a secure and reliable
financial institution. As Topo Finance points out, this work is just a different
frame on this fundamental engagement practice.

“As this report shows, through their lending and investing powers, financial firms
will play a critical role in determining our collective climate fate,” said
Rebecca Self, Topo’s
sustainable finance analytics lead, former CFO of sustainable finance at HSBC
and co-author of the report. “By helping businesses understand how financial firms
are channeling their money toward a carbon-intensive future, we aim to help
companies understand why they need to work with their financial firms to
decarbonize their finances and rapidly shift investments away from climate
drivers and into climate solutions at scale.”

Produced by Topo Finance in partnership with BankFWD, the Climate Safe
Lending Network
, Exponential Roadmap Initiative, Futerra, Pure
Strategies
and the World Business Council for Sustainable Development,
The Carbon Bankroll 2.0 features critical insights, including:

  • If the largest banks and asset managers in the US were a country, they
    would be the

    third-largest carbon-emitting country in the world, behind China and the
    US.

  • Nonfinancial companies in the US cumulatively hold about $7 trillion in
    cash and investments, and the total indirect emissions enabled by this money
    represents more than an estimated 20 percent of the country’s total gross
    emissions
    .

  • For many of the world’s most climate-conscious companies, the emissions
    stemming from their cash and investments likely either represent their
    largest source of emissions
    or are larger than all their other emissions
    combined
    .

In addition to its findings, the report also provides guidance on how to embrace
this new climate power, and it highlights the work companies such as Atlassian,
Patagonia and Seventh Generation are doing to transform their financial
management into a catalytic climate lever.

“Just when you think you’ve got all your sustainability focus areas humming
along nicely, you read The Carbon Bankroll report,” says Jessica
Hyman
, Chief
Sustainability Officer at Atlassian. “That was our team last year when we
learned how many tech companies’ financial assets are contributing to emissions
that exceed the company’s scope 1-3 emissions combined — talk about a wake-up
call. This realization led Atlassian to examine our own financial supply chain,
and we collaborated with the finance team to ensure we were taking a long-term
view. For example, we no longer use investment vehicles involving companies that
get more than 10 percent of revenue from fossil fuel extraction or development.
We’re aiming for better ROI for the company and the climate. This is just the
start, and there’s more we can do.”

“I thought Seventh Generation was doing everything we possibly could to act on
climate. I was wrong. I had overlooked one of our greatest climate powers — our
finances,” says Ashley
Orgain
, Chief Impact
Officer at Seventh Generation – which in 2022 launched its Climate Fingerprints
Framework

to comprehensively measure the climate impact of its corporate investments.
“With Topo Finance’s help, we have quantified the role cash and investments have
on our carbon footprint. The analysis and the insights have transformed our
strategy and set Seventh Generation on a course of action. We’ve published our
findings, and by utilizing guidance from The Carbon Bankroll report, we have
developed a multipart plan to work with our parent company and built a coalition
of like-minded businesses to tackle these hidden emissions. Join us!”

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