How financial institutions are tackling portfolio emissions

Financial institutions (FIs) generally emit low levels of emissions to run their direct operations, but they finance the emissions of companies across sectors through their loans and investments. These indirect financed or facilitated Scope 3 emissions represent the majority of emissions for the financial sector. As the main sources or facilitators of working capital across the global economy, FIs are pivotal in the transition to a low-carbon economy.

In this report, we analyze data from the S&P Global Corporate Sustainability Assessment (CSA) to understand FI strategies on a range of sustainable finance topics. We review data collected for banks, asset managers, capital markets firms and companies in other financial industries, excluding insurers. Specifically we explore:  

• Net-zero commitments for Scope 3 portfolio emissions, which include financed emissions or emissions attributable to investments, depending on the company’s activities
• The trend over the past three years for disclosure of Scope 3 portfolio emissions
• How companies are restricting their financing or investments related to certain emissions-heavy industries, such as coal and unconventional oil and gas
• Whether companies engaged in corporate finance, such as loans or capital offerings, offer sustainable finance products, such as green loans to corporate clients

FIs are increasing their commitments to net-zero targets for financed emissions, but progress remains slow. The share of companies globally setting such targets rose from 15% in 2023 to 22% in 2025. Setting net-zero targets for financed emissions can be a critical step toward portfolio decarbonization, but the credibility of these targets hinges on their coverage and on the presence of clear implementation pathways. One key indicator of credibility is whether a company also has an actual emissions reduction target on the way to achieving the ultimate goal of net-zero. CSA data shows that a similar share of companies (21%) set intermediate reduction targets for financed emissions.

While this data indicates progress over the last three years, in 2025, 78% of assessed FIs did not have net-zero targets for their portfolios.

This picture becomes more nuanced when we explore differences in geographies.Higher levels of net-zero commitment among European banks and asset managers reflect a regulatory and policy environment that requires more action on climate management compared with other regions. European FIs have operated under frameworks including the EU Taxonomy, the Sustainable Finance Disclosure Regulation and the Corporate Sustainability Reporting Directive. In 2025, the European Banking Authority published guidelines explaining what firms should include in transition plans to address risks stemming from the EU’s objective to become climate neutral by 2050

In the UK, the Bank of England's Prudential Regulation Authority (PRA) in December 2025 updated its supervisory expectations for banks and insurers regarding their management of climate-related risks. The expectations are designed to guide banks and insurers in managing physical and transition risks.

In the UK, the Bank of England's Prudential Regulation Authority (PRA) in December 2025 updated its supervisory expectations for banks and insurers regarding their management of climate-related risks. The expectations are designed to guide banks and insurers in managing physical and transition risks.

While the EU’s climate policy framework is undergoing significant simplification, it remains robust compared with other regions. The level of net-zero commitments in Europe contrasts with that of North America, where a US federal rule mandating climate management and emissions disclosures finalized in 2024 has been rolled back. A handful of individual US states continue to push for climate disclosures; in California, a state law mandating emissions disclosures was upheld in November 2025 while a separate law requiring climate-related financial risk disclosures was halted. California’s Climate Corporate Data Accountability Act faces legal challenges but takes effect in 2026, creating the expectation that all companies with annual revenue of $1 billion or more doing business in the state will begin disclosing their emissions. Companies have an additional year to begin reporting Scope 3 emissions.

Any effort to lower Scope 3 emissions for a bank or asset manager requires an accurate view of the emissions represented in the FI’s portfolio. Measuring these emissions can be challenging, which partly explains why few companies have set net-zero commitments or intermediate reduction targets.

The share of firms reporting on their Scope 3 absolute emissions has risen since 2020, but the rate of increase has slowed in recent years. About one-quarter (24%) of the FIs we assessed currently quantify and report their financed emissions. As with net-zero target setting, Scope 3 emissions reporting is far more common in Europe (75% of assessed companies in 2025).

Part of the challenge of Scope 3 reporting is capturing the full breadth of a portfolio.
Across the 85 firms that disclosed their Scope 3 emissions in the 2025 CSA, companies reported a wide range of coverage. While many companies said their disclosed Scope 3 emissions covered most or all of their portfolios (whether loans, investments or assets under management), others acknowledged that their disclosed portfolio emissions represented only a fraction of their entire portfolio. For example, while 39 of these 85 companies said their reported figure represented more than three-quarters of their total portfolio, another 27 companies said their reported Scope 3 emissions represented 50% or less of their portfolios.

To achieve their decarbonization goals, some FIs are also taking specific steps to restrict or cut ties with certain fossil fuel industries. 

The CSA evaluates whether companies have adopted policies related to restricting financing or investing in some of the most carbon-intensive energy industries — specifically coal and unconventional oil and gas

U nconventional oil and gas refers to oil and natural gas extracted from rock formations that are inaccessible without technologies such as horizontal drilling and fracking. It can also refer to extraction that occurs in particularly remote or ecologically sensitive areas, such as within the Arctic circle or in deep offshore waters. The high environmental and reputational costs — and in some cases, the potential for additional methane emissions at extraction — has made unconventional oil and gas subject to scrutiny at more FIs in recent years.

In 2025, 31% of the 563 banks the CSA assessed on coal financing had either implemented policies that restrict coal-related financing or had no exposure. That number was up from 26% in 2023. Policies restricting investing in coal followed a similar trajectory, rising from 23% in 2023 to 28% in 2025.

This data suggests that while commitments to net-zero financed emissions are increasing slowly, the adoption of policies to limit financing and investing in coal activities is advancing at a faster pace.

The CSA questions on fossil fuel financing policies align with leading standards and methodologies, including the Science Based Targets initiative recommendation for a “disclosure, transition and phase-out” approach. The CSA focuses on the quality of policies governing fossil fuel financing and investment, which should include four key elements: exclusion of new projects and expansions; time-bound engagement with clients to support transition or set SBTi targets; sectoral thresholds to guide engagement and internal decarbonization plans; and sectoral phase-out commitments.

While restriction or full exclusion of coal financing and investing is growing more common worldwide, there is still wide regional variation. A majority (62%) of European financial institutions now have some kind of coal restriction policy or have no exposure. The same is true for only a handful of North American companies (4%). In recent years in the US, some financial institutions have come under scrutiny for pivoting away from fossil fuel financing, setting decarbonization goals or implementing other climate policies. A group of state attorneys general subpoenaed six major US banks in 2022 over their membership in the UN-backed Net-Zero Banking Alliance, and by early 2025, all of the largest US banks had departed the alliance.

Continued financial support for these activities — particularly thermal coal extraction — is at odds with energy and emissions pathways that align with the Paris Agreement’s goal of limiting global warming to 1.5 degrees C above preindustrial levels. S&P Global climate scientists now expect warming of 2.3 degrees C is probable by the year 2040.

The continuation of coal mining and power generation presents economic considerations as well as environmental ones. The global energy mix is shifting away from coal as renewables become cheaper; the S&P Global Energy Base Case scenario projects demand for coal to shrink by more than half by 2060 from its 2025 level. About half of global thermal coal capacity could be loss-making by 2030, representing stranded assets in FIs’ portfolios, according to the UN-convened Net-Zero Asset Owner Alliance.

Restricting fossil fuel activities is one key way an FI can make progress on decarbonization. Doing so can help address the risk side of the energy transition — pivoting away from more carbon-intense industries. FIs also have opportunities to facilitate the energy transition by offering corporate finance products  — loans or credit lines, fixed-income or equity issuance and other services for raising capital for corporate clients — with sustainability objectives. This topic has come into focus in recent years with the rise of sustainable or green finance taxonomies around the world, as different jurisdictions follow the lead of the EU Taxonomy. These frameworks identify the economic activities that contribute to sustainability, including combating climate change and adapting to climate physical risks.

CSA data shows that 42% of assessed FIs offer sustainable corporate finance to clients, such as green loans, sustainable loans or sustainability-linked loans — a share that has changed little since 2023. Meeting the scale of finance needed for sustainable development will likely require more involvement from the private sector. At COP29, the UN climate conference that took place in November 2024, parties agreed to a climate finance goal known as the New Collective Quantified Goal, which targets $1.3 trillion annually from public and private sources combined by 2035.

This lack of progress on sustainable corporate finance is consistent across regions with the exception of Latin American banks, which are offering sustainable finance at a higher rate than any other region. Previous S&P Global Sustainable1 research has shown that Latin America also has the highest share of companies with public commitments to halting deforestation and protecting biodiversity.

The region was host to the most recent gatherings of the UN’s annual biodiversity and climate change conferences, COP16 in Colombia and COP30 in Brazil, respectively. At COP30, 53 countries endorsed an international conservation project called the Tropical Forest Forever Facility (TFFF), which aims to establish a $125 billion fund that allocates payments to countries that preserve their tropical forests. The private sector will have a large role in the TFFF: Most of the fund ($100 billion) is intended to be raised from institutional investors.

Our analysis highlights the gradual steps  financial institutions are taking to  decarbone their portfolios. Applying a geographic lens reveals significant regional differences, with European financial institutions leading the way in transparency, net-zero ambitions and restrictions on fossil fuel financing. The landscape of regulatory expectations for portfolio emissions disclosure is inconsistent across regions, though a globally recognized framework from  the International Sustainability Standards Board (ISSB) is gaining momentum. The ISSB’s initial standards, IFRS S1 and IFRS S2, have been adopted or are in the process of being implemented in 37 jurisdictions around the world. IFRS S2, which covers climate-related risks and disclosures, requires Scope 3 reporting, though many of the jurisdictions implementing the standard are phasing in the disclosures over time to give companies more time to prepare.

Disclosure, target-setting and decarbonization remain low among US banks. California’s emissions reporting law could have a significant impact on the level of financed emissions disclosure in the US over the next two years, with Scope 3 reporting set to begin in 2027. It remains to be seen how regulatory developments in North America affect decarbonization progress for the region’s financial sector.

Decarbonizing to address transition risk is only part of the whole story for the financial sector: Banks and asset managers also provide the capital to support clean energy projects and climate risk adaptation. FIs have a far-reaching opportunity to finance the energy transition — an opportunity estimated in the trillions of dollars.

Thank you to Isabelle Stauffer and Hana Beckwith for their contributions to this research.