LONG VIEW A CORPORATE TREASURER AND THE FINANCE FUNCTION IN GENERAL WILL NEED TO TAKE EMISSIONS VERY SERIOUSLY it comes to financial services, Scope 3 can be almost the entirety an estimated 99.8% of a firms GHG production. Rule-makers have noted the importance of Scope 3. The Task Force on Climate-related Financial Disclosures (TCFD) strongly encourages Scope 3 disclosures, with Premium-listed firms, including financial services, mandatorily using TCFD for the first time in 2022. Last year also saw the International Sustainability Standards Board (ISSB) agree at its Montreal meeting that disclosure of Scope 3 emissions would be mandatory if using its reporting scheme. UK Prime Minister Rishi Sunak, when Chancellor of the Exchequer, pledged that the UK would adopt ISSB standards when they have been approved. Elsewhere, financial institutions that joined the Glasgow Financial Alliance for Net Zero established at COP26, and now with more than 550 members following COP27 must come to terms with guidance issued in November 2022 that deals in large part with Scope 3 originating in client and portfolio companies. IStock / MaRussya Positive influence The sheer proportionate scale of Scope 3 emissions for financial services firms makes them a critical factor in the contact between credit providers and their clients. If finance firms have to disclose their Scope 3 emissions, they have to collect data from corporates. Doing so places credit providers on the leading edge of corporate efforts to tackle GHGs. Many have made commitments to work towards net zero by 2050 and must now deliver, even though it remains early days. Scope 3 emissions of credit providers are important from a global perspective, says Ian Bhullar, sustainability lead for UK Finance, the trade association for banks and financial services. Financiers have the ability to positively influence a wide variety of existing and potential clients. And that would inevitably change the relationship between financial institutions and their clients. Broadly speaking, credit providers will be managing two issues: on the one hand, they face disclosure requirements; on the other, judging creditworthiness is now no longer a question of financials but also the climate change risk. Rocco says: The pressure that the banks are facing in terms of reporting will inevitably have to pass through [to clients]. According to Howard Shih, a research associate with the Science Based Targets initiative (SBTi) a not-for-profit organisation consulting with companies on how to set and meet science-based climate change goals credit providers will not only collect data but will engage with clients on how their emissions can be reduced. In order to achieve these goals, financial institutions must reduce emissions associated with their Scope 3 investments 14 ISSUE 1 2023 treasurers.org/thetreasurer TT ISSUE 1 23 pp12-15 Scope.indd 14 23/02/2023 09:06