FLAG emissions in scope 3 category 15

General
1

Hi,

My name is Kassana and I am currently helping a Malaysian government-owned Bank who are providing financial services and lending finance to Agro businesses as their primary duty. They are interested and considering setting science-based targets in accordance with SBTi.

Because of their nature of the business, they expose to a vast number of Agro borrowers and such loans have been considered as the main source of financed emissions. Moreover, based on our understanding, this also leads to a significant amount of FLAG emissions (i.e. LUC and Non-LUC emissions) proportion in the bank’s inventory (scope 3 category 15). I am now concerning about the requirement, mentioned in FLAG Criteria 1 on page 13 in FLAG guidance saying that “Companies with FLAG-related emissions that total 20% or more of overall emissions across scopes 1, 2 and 3 are required to set FLAG targets”. (link: SBTiFLAGGuidance.pdf (sciencebasedtargets.org))

Questions:

  1. Will the bank need to follow both SBTi for FI and FLAG? If not, what standard to follow?
  2. If yes, then for FI target setting approach for FLAG related financing will the three options for target setting become FLAG (instead of SDA), portfolio coverage (PCA), temperature rating (TRA)? Or will the bank be limited to only FLAG pathway?
  3. If answer to 1 is yes, then that means the bank will need to submit both FLAG and FI targets?

We would be grateful if you could give us response, clarifications and recommendations on theses and please correct me if I misunderstood anything.

Thank you very much for your time and help!