Minimum portfolio coverage

Hi. I am supporting my client, whose major borrowers are SMEs, and have one question about minimum portfolio coverage. I would be appreciated if you could answer the question.

According to the SBTi standard, the required minimum coverage for corporate lending of SME loans is optional. As most of the financing and lending of our client goes to SMEs, approximately 96% of total lendings and financings goes to SMEs. If we set a SBT target for the rest 4% lendings and financings, does this meet the requirement of SBTi standard?

Hi, @HM_S,

Welcome to the community.

I theory yes, but best practice is naturally to include the SME lending as well. As it is 96% of the lenders portfolio SBTi may question how relevant the target is covering only 4% of assets and it may be better to set a target for SME or wait until the lender can set at target on SMEs.

There are always data challenges in all sectors and asset classes. Part of SBTi’s theory of change is for financial institutions to use their influence as banks, investors, etc to engage with companies to improve data availability and transparency. This is one of the main tasks for e.g. the Portfolio Coverage and Temperature Rating methods, to engage with companies to set targets, and to do that companies naturally need to collect, measure and disclose data to support these targets.

Hi there,

I have a a question regarding the coverage of scope 3 category 15.

According to table 5.2 in the Financial Sector Science-Based Targets Guidance, the required minimum financed emission coverage for exchange traded funds(ETF) is 100%. Since PCAF’s guide does not specify the methodogy for calculating the financed emissions for ETF, we decided to obtain the data through MSCI (Morgan Stanley Capital International).

We were not able to secure data for 7.5% of our client’s ETFs due to the following reasons:

  • no processing methodology with inverse funds(short position),
  • the funds set-up date is within 1 year,
  • the coverage of holdings held by the fund is less than 65% (using MCSI’s data), or
  • the sub-assets (excluding FOF) are within 10 holdings.

My question is, in this case, would the SBTi validate my client’s targets, even if they don’t meet the required minimum coverage standard?