Investments in carbon removals to contribute to bank emissions reduction targets

I’d appreciate clarity on the following question: Do banks’ investments in carbon removals (i.e. assets with a negative carbon footprint) count towards SBTi emissions reduction targets? If so, are there any restrictions on the amount of financing, or when the financing can be made while still being counted towards SBTi targets?

Note the following:

  1. SBTi FI target-setting framework from Feb 2022 is clear that offsets cannot be counted towards SBTi emissions reductions targets, but suggests that lending or investments in carbon removal assets could count. See FI C11 offsets (page 37)
  1. Science-based net zero targets article, Oct 2021, notes that “When a company reaches its net-zero target, only a very limited amount of residual emissions can be neutralised with high quality carbon removals, this will be no more than 5-10%.” This suggests that carbon removals can only be used at 2050, and that it must be limited to 10% of total decarbonisation.

Many thanks!

2 Likes

Hi JJO,

The answer you are looking for is discussed in this paper.

Page 47->

This is still unclear to our organisation as well. We are eagerly looking forward to hear answer to this question, especially on how to deal with the carbon credits. So far we have reported our scope 3 category 15 removals and separately reported also the carbon credits sold from these removals.

Hi Kenneth and JJO - thank you for your questions. We are kicking off our Standard Development Process for the Net-Zero Guidance this month. We are aiming to have further guidance around topics of green finance and other topics such as carbon-credits and portfolio neutralisation. We are looking to address the issues you both brought up in our guidance release come Q1 '23, with release of some topics for public consultation leading up to the final release.

Please reference our social media and this webpage Net-zero for financial institutions - Science Based Targets for updates going forward. We appreciate your engagement and will keep your questions in mind.

Hi @hunterb and @jjo,

Is there any latest news how the GHG protocol land use and land use change accounting guidance will affect to this?

Especially for this question →

a) Neutralizing residual emissions at the asset class or sector level thorough actively financing carbon removal activities, exclusive of carbon credits

What is meant by the exclusive? So when institution is financing removal project. For example direct air capture project. Where every ton of CO2 removed are sold to third parties and financial institution is not buying any of the credits. Would that be accounted as a neutralizing residual emissions or should the institution deduct the credits from the removals, which would lead to zero removals in financial institutions accounting of this project?