Embedding good practice
Following the publication of the Banks first Carbon Management Plan, Craig Love, the Bank’s Associate Director of Climate Impact, discusses our approach to carbon management and embedding good practice across our operations and investments.
At the Bank, we are driven by ambition around climate change and supporting Scotland’s just transition to net zero by 2045. This target is at the core of what we do, as one of our three missions aimed at tackling the grand challenges facing Scotland.
We want to be a leader in this space and over the course of the last year, we have been focused on efforts to deliver that ambition. This includes working with our portfolio, other financial institutions and public bodies to help them on their own climate journey. We have also supported the work of academia, the third sector and Scottish Government, through the development of climate related proposals, studies, guidance and programs.
Along with supporting others, we also need to contribute to Scotland’s emissions reductions targets.
There are two key areas of focus for the Bank in relation to greenhouse gas emissions - our operations and those associated with our investments. Although we aim to reduce the environmental impact from both, we have little control over the emissions from our investments, compared to those from our own operations.
Our approach has also been informed by the reporting requirements set by the Scottish Government - all publicly funded institutions must set a date for net zero operations.
Taking these elements into consideration, we have adopted the “Greenhouse Gas Protocol: Corporate Value Chain (Scope 3) Accounting and Reporting Standards”. Using this approach, we will account for 100% of the GHG emissions from the operations under our control (business travel and electricity consumption etc.), but we will not account for operations where there is an interest but no control.
This doesn’t mean we are ignoring the emissions from our portfolio, we have just split it from our operational boundary, giving us two separate carbon footprint profiles:
We aim to reduce the emissions we control, whilst supporting the reduction of emissions where we invest.
Carbon Management Plan
Our Carbon Management Plan outlines our approach to assessing and understanding the emissions generated from our actions. This includes the identification of our operational boundary, our data sources and metrics used to calculate our emissions and set a baseline, and projects aimed at reducing emissions.
Within the plan we have made three high level commitments. Our first commitment is our emissions reduction target - 5% reduction against our 2022/23 baseline. While this might not seem ambitious, it was chosen as we acknowledge our emissions are likely to grow over the next couple of years as the Bank matures and continues to invest.
This means that the overall reduction achieved by the end of the financial year 2028/29, is likely to be greater than the 5% documented, as the additional emissions we generate over the next few years above our baseline, will need to be reduced in order for us to meet the reduction target set against the 2022/23 figures.
There is also an element of proportionality, as the Banks operational emission profile is relatively small, with many good practices around renewable energy, waste management etc., already established.
It is also important to stress that target is only our initial commitment, it may be refined over time as we mature and develop our approach.
Our second commitment within the plan is to align Task Force for Climate Related Financial Disclosures framework and report under the four core recommendations - Governance, Strategy, Risk Management and Metrics and targets.
Our CMP addresses many of these recommendations – outlining our approach to climate change, our internal governance structure and roles, whilst touching on other areas of climate risk.
The plan also highlights how we will measure and report emissions from our portfolio and allocates a proportional share of these to the Banks profile.
Portfolio Carbon Management
Although we measure and report these emissions annually, it is important to stress that the management and control of emissions is the responsibility of investees.
Our third commitment is to ensure that all new investments we make require the company to deliver a carbon management plan or net zero strategy relevant to their operations.
We support investees to identify improvements in their own business, establish good practices now to prepare them for the future and to help Scotland’s transition.
While this requirement is in place for new investments, we will also be working with our portfolio to support those who don’t have a carbon management plan or net zero strategy in place yet.
By embedding carbon management as a standard across our portfolio, it will lead to greater future emissions reductions, rather than set unrealistic targets for companies, many of whom are in the early stage of their own development.
First step on the pathway
We will continue to strive for excellence when it comes to establishing best practice and transparency. This plan is only the first step, we now need to take action to ensure that the commitments we have made come to fruition and ultimately go beyond them, to exceed the targets we have set .