Robust, comparable, and decision-useful climate-related metrics are essential for financial institutions to effectively manage risks to which they are exposed. Scope 3 emissions, which include emissions by the debtors and portfolio companies of a financial institution, are especially relevant for the financial sector accounting for the largest share of its GHG emissions. Yet assessing climate-related exposures requires more than GHG emissions data alone and they must be complemented by information on portfolio composition, including investments in high- and low-carbon activities, as well as on the company’s engagement practices, governance frameworks, and transition strategies.
Financial institutions continue to face considerable challenges in measuring and disclosing GHG emissions, particularly for financed emissions. Data gaps, evolving methodologies, and varying levels of granularity can hinder the comparability of disclosed information. These challenges are especially pronounced for smaller institutions and in emerging and developing economies, where data availability is more limited. In addition, key asset classes such as private equity, sovereign bonds, and loans often fall outside the scope of the most commonly used methodologies, leading to blind spots in assessing climate-related risks and exposures.
A key pillar of credible climate risk management is the adoption and disclosure of clear GHG emissions reduction targets. Robust net-zero commitments, accompanied by transparent reporting on progress, enhance accountability, support effective risk management, and build trust among stakeholders. Targets offer strategic direction internally, while enabling external stakeholders to evaluate whether institutions are on track toward their climate commitments. To track progress toward emission targets, financial institutions typically rely on both absolute and intensity-based metrics.
This paper identifies the main data gaps hindering the assessment of financial institutions’ progress toward their GHG emission reduction targets and net-zero commitments. Drawing on several third-party data sources, it presents an analysis of the ambition, scope, and feasibility of disclosed climate commitments. By mapping these challenges, this paper proposes a framework to monitor the transparency, comparability, and credibility of net-zero commitments in the financial sector.
This paper has been developed by the Capital Markets and Financial Institutions Division of the OECD Directorate for Financial and Enterprise Affairs. It was prepared by Valentina Cociancich and Xue Han, with the support of John O’Shea and Matthis Cadeau, under the supervision of Caio de Oliveira, Head of the Sustainable Finance and Corporate Governance Team, and Serdar Çelik, Head of Division. Input was provided by delegates to the OECD Working Party on Sustainable Finance.