Portfolio Coverage Weighting Approach

Methods
1

Hi,

In the target guidance for the financial sector (FI-C17.2 – SBT Portfolio Coverage Targets) we are given the option to choose between the different weighting approaches given in the SBTi Finance Tool. I assume that this gives us the choice to use WATS, TETS, MOTS, EOTS, ECOTS, AOTS or ROTS. Is that correct?

We would like to use the ECOTS approach, as this creates a direct link between our financed portfolio emissions and our science based target. In the guidance (and also the Temperature Rating Methodology) it is only stated that we should weight “company emissions”. Which scopes should be included?

I can think of a few options

  1. Scope 1+2 for all portfolio companies.
  2. Scope 1+2+3 for all portfolio companies.
  3. Scope 1+2 for all companies, and also Scope 3 for some chosen sectors (i.e. oil & gas, automotive etc.)
2

For Portfolio Coverage, I would recommend #2, otherwise the draft Near-Term Financial Sector SBT Guidance Version 2 has proposed #3 at a minimum.

4

Thanks Howard.

From the draft, it looks as if Scope 3 for automotives and oil & gas is only included in portfolio coverage targets for corporate loans (page 56). I guess that it should be the same for listed equities and bonds as well?

Are there any chances of other sectors having their Scope 3 covered in the near term (other than automotives and oil & gas)?

5

Yes, that should apply to equity and fixed income as well. No changes on that have been proposed at this time in the pilot test version 2.0 of the Near-Term Criteria and Recommendations for FIs.