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Case Study

A Regional Bank Embraces ESG Reporting

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A Regional Bank Embraces ESG Reporting

Highlights

THE CLIENT: A mid-sized regional bank

USERS: The Investor Relations (IR) team

Banks in the U.S. are paying more attention to environmental, social and governance (ESG) issues given demand from investors, boards of directors and other stakeholders for more transparency.[1] That said, many struggle to accurately collect and report necessary data or effectively tell their story on these issues.

The head of IR at this regional bank saw the growing need to have a climate strategy and disclose the company’s current carbon footprint and plans for improvement over time. He felt this would help the bank get ahead of the curve relative to its peer group, plus address new requirements from the board of directors and credit rating agencies.

For most business activities, the largest proportion of the carbon footprint is concealed in supply chains or in the product use and disposal phases. Given this, the IR team wanted to look at the carbon footprint of the bank’s business partners, as well as its own operations and use this as a baseline for setting reduction targets.

 

Pain Points

Carbon footprinting assesses a company’s greenhouse gas (GHG) emissions, providing a baseline from which to mitigate risks. Carbon intensity (CI) is a measure that scales GHG emissions by company revenue to facilitate comparisons of emissions across entities of different sizes. Companies with lower CI values generate fewer tons of GHG emissions per $1 million USD of revenue than those with higher CI values. 

Carbon footprinting and target setting were new endeavors for the bank. To obtain results that were both meaningful and actionable, the team needed to tap into expertise that could help:

  • Review the bank’s own operations and suppliers to determine Scope 1, 2, and 3 emissions in tons of CO2 per year.[2]
  • Determine carbon emissions for small-and medium-sized enterprises (SMEs) that don’t disclose this information.
  • Establish reasonable targets to measure progress over time.

The IR team had heard about S&P Global Market Intelligence’s (“Market Intelligence”) ESG work and contacted the firm to learn more about its capabilities.

The IR team wanted to get ahead of the curve on ESG reporting and needed the help of an environmental specialist for carbon footprinting and target setting. 

 

The Solution

Market Intelligence discussed a work plan that would look at real estate-related Scope 1 and 2 emissions, as well as procurement-related Scope 3 emissions. This would draw on a wide array of proprietary data, including that from S&P Global Trucost, which assesses risks relating to climate change, natural resource constraints and broader ESG factors. For the real estate analysis, the bank would provide data on office locations, floor space, occupancy, energy consumption and available energy efficiency certifications. For the procurement analysis, the bank would provide specific purchase ledger data that would be used in conjunction with Trucost’s extensive environmental register. This would give the Market Intelligence specialists the ability to:

Evaluate carbon footprints S&P Global Trucost Environmental Data contains information on over 16,000 companies, [3] covering Scope 1, 2, and 3 with metrics on quantities and intensities of carbon-equivalent emissions (tCO2e, tCO2e/US$ revenues) and their estimated damage cost equivalents (US$), along with impact ratios. It includes company revenues and percentages of revenues derived from each of 464 business sectors. 
Estimate carbon data when not reported Private Company Data covers 16 million private companies around the globe, 10 million private companies with financial statements and 500,000+ early stage companies supported by data from Crunchbase. This is used to compare private companies against similar public companies to estimate emissions. 
Establish Targets and Metrics Following the Greenhouse Gas Protocol, an international standard for corporate accounting and the reporting of emissions, targets and metrics can be established to measure and manage GHG emissions and become more efficient and resilient over time.

 

Key Benefits

The proposed work plan met the IR team’s needs, and the team agreed to start collecting internal data right away. The IR team saw tremendous value in having:

  • Access to a renowned team of specialists known for their environmental work with banks and other organizations.
  • A time-tested approach for determining a company’s carbon footprint.
  • Extensive environmental data to conduct the analysis.
  • Exposure to the overall process to understand the type of data needed to keep the analysis up to date.
  • Advice on how to approach reporting to meet the demands of stakeholders for more transparency on the bank’s environmental stance.
  • Support to establish reasonable emission targets and metrics for the bank’s specific business.
  • The ability to position the bank well with customers and credit rating agencies looking for more ESG disclosure.

 

Click here to explore some of the datasets and solutions used in this case study.

 

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[1]  “Banks are more ESG aware but struggle with data”, S&P Global Market Intelligence, May 20, 2021,http://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/banks-are-more-esg-aware-but-struggle-with-data-64402288

[2]  Scope 1 are direct emissions, Scope 2 are energy-related emissions and Scope 3 are supply-chain emissions.

[3]  All data as of January 2021.