There are many reasons why a financial institution – be it an asset owner, asset manager, bank or insurer – would want to assess its financed carbon liabilities. Some are simply responding to stakeholder requests for transparency – members are asking pension funds, pension funds are asking fund managers, customers are asking banks and insurers, and a host of NGOs, pressure groups, campaigners and reporting initiatives are asking just about everyone. Others are digging deeper and finding innovative ways to integrate carbon in their decision making to capitalize on opportunities.
But despite growing demand for corporate transparency, disclosure on carbon liabilities remains patchy. Some regions and sectors are doing well, others are lagging. And even where there is disclosure, it is all too often not standardized, not validated – or worse – not correct. Financial institutions need to understand how gaps and reporting errors in company disclosure can bias decision making.