Portfolio growth and rebaselining for SDA

Hi there,

Can I please get some clarification on (1) the CAGR assumption for loans to corporates and (2) baseline recalculation criteria?

In a hypothetical scenario, a bank lends to power generating companies and is setting an intensity target for 2030, using the SDA. For 2030 activity output, it is assuming that the companies in the portfolio are growing at the scenario sector rate (15% or so), so it selects the appropriate item from the tool dropdown. 2 years after setting the target, the bank has increased the size of its power lending portfolio, with companies that are fast transitioners, even almost 100% renewables companies. It is also engaging its existing portfolio to accelerate the transition.
(1) Can I please check that the SBTi Tool growth assumption I outlined refers to the growth rate of the underlying companies and NOT the growth rate of the portfolio? If it is the latter, would the outcome not be a complete constraint on the bank’s ability to provide additional finance to the sector? Considering the amount of additional (beyond shifting) capital needed for the transition, this would seem unfeasible. Every company added to the portfolio, regardless of how aligned to net zero they are, would add emissions and activity output, leading to the intensity metric to get more and more stringent; effectively meaning the portfolio size in financing terms needs to remain as is and not grow at all.
(2) On the basis that the above is correct and certain portfolios will grow in terms of financing, is it appropriate to recalculate the baseline in line with a rebaselining threshold periodically? This would change the starting and ending point but not the absolute and intensity reductions; and would allow the bank to demonstrate that it is achieving real reductions on an absolute basis, across its full portfolio.

This base year recalculation question is the equivalent of changes in the number of buildings occupied in a scope 1+2 operations target, where there is only a transfer of control of emissions and not a real increase / decrease in emissions. As buildings come in and out of the portfolio, the base year is recalculated as appropriate so the starting and ending point of a target may change but the absolute reduction remains the same, reflective of current portfolio and therefore real reductions are achieved.

For context, this links somewhat to a separate question to which I have not received a response yet: Adjustments to baseline for the purpose of target setting - Criteria - Science Based Targets for Financial Institutions

Many thanks,

Ana