Union Bank of India Becomes the First Major Bank to Sign On with PCAF

Tags: Economics/Business

Union Bank of India has joined the Partnership for Carbon Accounting Financials (PCAF), aligning with global trends in climate risk management.

An Overview of the News

• PCAF is a global coalition of financial institutions focused on creating and implementing standardized methods to assess and disclose greenhouse gas emissions from loans and investments.

Significance of Financed Emissions:

• Financed emissions, also known as Scope 3 emissions, are the indirect emissions arising from a bank's lending and investment activities. 

• These emissions often exceed the bank's direct operational emissions and present significant risks due to climate change and evolving regulations.

RBI Draft Guidelines:

• The Reserve Bank of India's draft guidelines on 'Disclosure Framework on Climate-Related Financial Risks, 2024', issued on February 28, 2024, highlight the importance of tracking financed emissions.

• The framework requires regulated entities to disclose information in four key areas: governance, strategy, risk management, and metrics and targets.

• The guidelines represent a move towards stricter climate risk reporting standards for Indian banks.