Following this thread – we require the same clarification. 
That is:
(1) Are all commercial real estate activities (both loans and investments) considered in-scope, regardless of them being public or private?
(2) Are all of the methodologies (SDA, temperature approach, and portfolio coverage) applicable or are we required to use SDA for commercial real estate in any specific instances?
Hi,
My company is currently setting a standard for the coverage of corporate bonds for our client’s financed emissions. Our methodology in separating what to and what not to include is by identifying the ISIN(12 digit) code of the bonds which my client is in possession of. In South Korea, following the two letter country code, the third digit of the ISIN code represents the bond type. 3 represents special bonds and 6 represents corporate bonds.
My question is, would it be appropriate for us to only include bonds where the third digit of their ISIN code is 6 (i.e. corporate bond) or also include bonds where the third digit of their ISIN code is 3 (i.e. special bond)?
Thanks,
Yeun
- yes
- you can use all methods as described in table 5.2 on p. 55 in the guidance
@yeunhl
You should include all corporate bonds.
One good principle to use to understand if something is in or out of scope, which is “influence”. Can you as an investor/lender influence the behaviour of the entities you’re investing in/lending to? If yes, it is in scope and should be included in your target. Influence of behaviour can come if different forms, pricing, voting, engagement, product/strategy design/selection, etc.
.
Hi Donald,
Thank you for your quick response.
I would like to reclarify with you the definition of corporate bond.
My understanding of corporate bond before getting your response was that it only includes companies in the private sector. For example, Samsung Electronics, Apple etc.
However, if I apply the principle you suggested, special bonds which mostly consist of companies in the public sector (for example, Korea Electronic Power Corporation (KEPCO), Korea Development Bank (KDB), The Export-Import Bank of Korea, Industrial Bank of Korea (IBK) and Export-Import Bank of the United States) also fall under the corporate bond category.
Please can you confim if this is correct?
Thank you.
We may have a unique situation in that we both own AND operate real estate that is financed by our General Account, meaning it is already incorporated as part of our Scope 1 and 2 emissions targets given we use an operational control approach to emissions accounting. Would it therefore be appropriate to exclude this owned real estate from our financed emissions targets, since it is already covered in our Scope 1 and 2 target?
Yes, if certain activities are categorized under scope 1 and 2 based on the chosen inventory consolidation approach, then they would not fall under financed emissions and targets can be set accordingly.
I have a follow-up question on this topic. In following training module (SBTi-Financial-Institutions-Training-Materials_Module-5_Developing-SBTs-Scope-3-Financed-Emissions-Overview.pdf (sciencebasedtargets.org)) it is mentioned that for corporate loans the “all other sectors” for public debt are required to be for 67% covered by a target. For private debt this is mentioned to be optional. Is this distinction relevant also for a bank having to set a target on this product? If so, how does SBTi define ‘public debt’ for banks? Thanks in advance for your response!
Table 5.2 of the Near-Term Financial Sector SBT Guidance, which provides minimum coverage requirements, has been updated in the draft Version 2 with more granular specifications for each asset class.
The proposed changes are up for public consultation so we welcome your feedback/questions on this document, and two other new documents, through the survey by Aug 14.