The Union Bank of India has become the first major Indian bank to sign the Partnership for Carbon Accounting Financials (PCAF).
The bank has demonstrated its commitment to monitoring and controlling its financed emissions, which is crucial for its climate risk management strategies.
The PCAF methodology will also enable the bank to establish objectives and create action plans in line with international climate goals.
The RBI framework:
This action is also in line with the Reserve Bank of India’s (RBI) recently released draft guidelines on climate risk disclosures. These cover the increasing emphasis on climate risk management in the world.
The framework requires information on four main areas to be disclosed by regulated entities:
i. metrics and targets
ii. risk management
iii. strategy
iv. governance.
The RBI’s proposed guidelines indicate a change in direction for Indian banks’ climate risk reporting requirements.
Given the effects of climate change and changing regulations, the financed emissions, or Scope 3 emissions have the potential to exceed a bank’s operational emissions and pose serious risks to the bank’s portfolio.
PCAF gaining ground in India:
As of August 2024, over 500 financial institutions are signatories to the Partnership for Carbon Accounting Financials (PCAF).
PCAF is a global coalition of financial institutions that work together to develop standards for assessing and reporting greenhouse gas emissions
In India, the IDFC First Bank and Union Bank of India are the two signatories to PCAF. To further support the market, PCAF has recently announced its first accredited regional partnership in the Global South with with StepChange, an enterprise sustainability platform in India.
“The Indian market is a vital part of the global economic eco system, so we are both delighted and proud to be supporting financial institutions in the market as they begin to implement GHG accounting journeys. At PCAF, we are committed to ensuring that the Standard is applicable and viable for markets in all parts of the world and we will be working with financial institutions in India and other parts of the Global South to ensure the methodology remains inclusive,” said Angélica Afanador, Executive Director, PCAF, at a recent event in the country.