Mapping climate‑related metrics in the financial sector

4. Key challenges, policies and practices for better monitoring net-zero commitments

This paper identifies the main data gaps to assess financial institutions’ progress against their GHG emission reduction targets, using several third-party data providers, as well as analysis of the available data on how ambitious, comprehensive and feasible existing GHG emission reduction targets are. There are at least two pending questions that could be further explored. First, what could be solutions to close the existing data gaps for better monitoring net-zero commitments. Second, what core features would the ideal framework for monitoring net-zero commitments by financial institutions have.

4.1. Key challenges and potential policies

A clear set of credible, transparent and comparable metrics is needed to track progress on GHG emission reduction targets by financial institutions. Following the disclosures recommended by five voluntary frameworks to support the monitoring of financial institutions’ net-zero commitments (OECD, 2023[1]), this paper identifies the main data gaps to assess financial institutions’ progress against their GHG emission reduction targets, using several third-party (commercial) data providers (Table 1.1). This section proposes potential policies for better monitoring net-zero commitments.

Table 4.1. Key challenges and potential policies

Challenges	Potential policies
Data availability and comparability	Solution 1: focus only on a limited set of essential metrics to monitor net-zero commitments in the financial sector, including historical GHG emissions (especially scope 3 and its category 15), GHG emission reduction target rate(s), target year(s), baseline year, the use of carbon offsets to meet targets, and emissions covered by the target. Solution 2: adhere to climate-related disclosure frameworks consistent with high-quality, understandable, enforceable and internationally recognised standards that facilitate the comparability of sustainability-related disclosure across financial institutions and markets. Solution 3: create digital taxonomies for climate-related disclosure and/or a digital platform centralising financial institutions’ public climate-related information.
Quality of disclosure of climate-related metrics	Solution 1: phase in requirements for annual assurance attestations of climate-related disclosures by an independent, competent, and qualified attestation service provider for the most relevant climate-related metrics by financial institutions, such as GHG emissions. Solution 2: oversee the quality and credibility of financial institutions’ disclosure of GHG emissions based on a comparison between reported and estimated emissions.
Credibility and effectiveness of GHG emission reduction targets	Solution 1: encourage all financial institutions to develop and disclose net-zero transition plans (aligned with a standardised framework). Solution 2: provide better transparency of financial institutions’ supply of climate finance.

Data availability and comparability for climate-related metrics. In 2024, only 23% of listed financial institutions globally reported scope 1 and 2 GHG emissions, a percentage that drops to 19% for scope 3 GHG emissions (Figure 2.1). Among the financial institutions disclosing GHG emission reduction targets, only half have also disclosed the baseline year of the target, 86% the target year (Figure 2.12), and 26% the baseline emissions data (Figure 2.13).

The lack of data availability may be due to a combination of the following three factors.

Factor one: The financial institution may wish to disclose a specific metric but considers it too costly to develop the internal systems and expertise to collect and disclose the information. Data collection may be notably costly for investee companies that do not already disclose GHG emissions. This seems important since large financial institutions (with corresponding more significant resources) are more likely to disclose climate-related metrics than smaller ones. For instance, the 19% of financial institutions disclosing scope 3 GHG emissions represent 77% of total assets of all listed financial institutions in 2024 (Figure 2.3).

Factor two: Even where cost is not an obstacle, the financial institution may consider that there are no clear standards or methodologies allowing it to report truthful information that does not expose management to liability risks.

Factor three: The financial institution may report the information, but in a non-standardised way that is not easily readable by a machine. While investors and financial authorities may be able to analyse information of individual financial institutions, they will typically need to rely on commercial data providers to compare several institutions, especially if located in different jurisdictions. However, data providers cannot track detailed information from more than 4 000 listed financial institutions cost-effectively if it is not machine-readable.

The issue raised in factor one possibly has two solutions. One is capacity building for smaller firms, especially those based in developing economies: financial institutions, investee companies and service providers will need to gain the necessary knowledge of climate-related matters to develop cost-effective processes and good practices. Another solution is for financial authorities to require the disclosure of at least a limited set of essential metrics to enable monitoring of net-zero commitments in the financial sector. This paper analyses some of these essential metrics, including historical GHG emissions (especially scope 3 and its category 15), GHG emission reduction target rate(s), target year(s), baseline year, and emissions covered by the target.

The challenge in factor two has received significant attention from policymakers and standard setters. Several recommended disclosures in the main voluntary frameworks to support the monitoring of financial institutions’ net-zero commitments are now covered by the IFRS S2 Climate-related Disclosures set by the International Sustainability Standards Board, and the European Sustainability Reporting Standard E1 Climate Change adopted by the European Commission (Table 2.1). The existence of disclosure requirements in those standards may reduce concerns by financial institutions’ management on how to report on climate-related matters.

The question raised in factor three has also been dealt with by some recent initiatives. In April 2024, the ISSB published the IFRS Sustainability Disclosure Taxonomy (ISSB Taxonomy), enabling companies to provide a digital reporting package and allowing investors to search, extract and compare sustainability-related financial disclosures (IFRS, 2024[21]). In December 2023, the European Union adopted the European Single Access Point package (ESAP), which is expected to be operational by 2027. The ESAP is a digital platform centralising public financial and non-financial information about companies and investment products disclosed in accordance with European regulations (European Council, 2023[22]). Further, the Bank for International Settlements (BIS) is developing tools to assemble, extract, estimate, and analyse sustainability data. The Project Gaia under development is a large language model trained on climate and corporate reports from financial firms and aims to reduce data gaps related to climate-related risks (Bank for International Settlements, 2025[23]).

Quality of climate-related metrics. The quality of reported GHG emissions by financial institutions may be an issue for two reasons. First, only one-third of financial institutions that reported GHG emissions had a third party assuring the information in 2024 (Figure 2.9). Second, when comparing reported and estimated GHG emissions for a group of 1 166 listed financial institutions, it appears that the financial sector may be substantially underreporting its current GHG emissions (Figure 2.7).

The adoption of independent assurance by a competent and qualified external service provider is vital to enhancing the accuracy and quality of the reported data. To improve the quality of disclosed data, policymakers and financial authorities may consider phasing in requirements for annual assurance attestations by an independent, competent, and qualified attestation service provider for the most relevant climate-related metrics for financial institutions. Likewise, financial authorities may want to ensure the quality of GHG emission disclosure of institutions by comparing reported and estimated emissions, which would allow authorities to focus on financial institutions with a higher probability of misreporting.

Credibility and effectiveness of GHG emission reduction targets. Globally, 908 listed financial institutions (representing 18% of total listed financial institutions, 78% by total assets and 77% by AUM) disclosed GHG emission reduction targets in 2024 (Figure 2.10). Disclosure of GHG emission reduction targets is essential for the accountability of financial institutions that pledge to support the transition to a low-carbon economy, as it allows investors and stakeholders to evaluate ambition and progress.

When assessing the credibility and effectiveness of the reduction targets set by financial institutions, the levels of ambition, comprehensiveness and feasibility play an essential role.

Ambition may be evaluated based on annual reduction metrics. While recognising that sectorial information may be more useful, on average, listed financial institutions with targets aim for a 4.3% annual GHG reduction globally (Figure 3.1).

Comprehensiveness reflects the extent to which a company’s targets address its total emissions. In 2024, only 55% of total reported GHG emissions were covered by these targets (Figure 3.3).

Feasibility may be measured by the share of institutions that have reached or are on the path to meeting their targets. Globally, 65% of institutions setting a reduction target have not met their targets, while the remaining 35% have met the targets (Figure 3.4).

Financial institutions with GHG emission reduction targets are projected to have scope 1, 2 and 3 GHG emissions corresponding to 10%, 25% and 22%, respectively, of their 2024 reported GHG emission levels in 2050 (Figure 3.5). Notably, the reduction goals are more ambitious for the period between 2023 and 2030 compared to 2030 to 2050, underscoring the accountability of current management for achieving these targets.

A way for policymakers and financial authorities to increase the number of financial institutions disclosing GHG emission reduction targets, including net-zero commitments, and to augment the ambition and comprehensiveness of existing targets, would be to mandate the development of net-zero transition plans (aligned with a standardised framework) in the financial sector. Only 8% of financial institutions have set a climate-related transition plan globally (Figure 2.16). Nevertheless, policymakers should consider whether the benefits in terms of understanding companies’ transition planning and progress outweigh the costs for financial institutions. Moreover, policymakers and financial authorities in some jurisdictions may face legal limitations in requiring the adoption of transition plans with certain characteristics that may eventually limit financial institutions’ business decisions.

Limited environmental impact of net-zero commitments by financial institutions. Financial institutions are not the only sources of financing for high-emitting non-financial companies. Even if most financial institutions adopt ambitious and comprehensive GHG emission reduction targets in line with global climate goals, high-emitting non-financial companies may reinvest their profits and attract investments from states, individuals or other non-financial entities. In parallel with efforts to track progress on GHG emission reduction targets by financial institutions, attention should be paid to financing low-emitting companies that can outcompete companies with higher emissions in their respective markets.

Globally, less than 1% of listed financial institutions disclosed their green revenue share as a percentage of total revenues in 2024 (Figure 3.6). The value of sustainable syndicated loans is another way to assess financial institutions’ green activities. In 2024, sustainable lending equalled USD 621 billion, corresponding to 11% of all syndicated loans (Figure 3.8). Better transparency of the supply of climate finance could support a better understanding of financial institutions’ role in financing low-emitting companies.

4.2. A proposed framework for monitoring net-zero commitments

This paper identifies a list of core metrics for monitoring corporate net-zero commitments in the financial sector. While data availability is currently low, it is expected to increase. Using increasingly available data, financial authorities, investors and other stakeholders can monitor financial institutions' net-zero commitments. This section proposes a framework for monitoring net-zero commitments structured around five core steps.

Table 4.2.  A proposed framework for monitoring progress against net-zero commitments by financial institutions

Steps	Purpose	Key Metrics
1. Collecting GHG Emissions and Reduction Targets	Ensure a minimum level of information to monitor net-zero commitments	i) Historical GHG emissions (especially scope 3 and its category 15) and methodology used to calculate emissions ii) GHG emission reduction target rate(s), target year(s), baseline year, the use of carbon offsets to meet targets, and emissions covered by the target(s) iii) Third-party assurance of the information above iv) Estimated GHG emissions (especially scope 3)
2. Evaluating Reduction Targets by Scope	Assess ambition, comprehensiveness, and feasibility of GHG emission reduction targets by scope	i) Annual reduction rate, including especially for scope 3 GHG emissions ii) Interim milestones for 2030 and 2050 iii) Benchmarks for ambition: pathways aligned with Paris Agreement goals iv) Coverage ratio of targeted emissions over total GHG emissions v) Emissions on track with target projections
3. Monitoring Adherence to Voluntary Initiatives	Align targets with credible voluntary initiatives	i) Commitment in net-zero credible voluntary initiatives (e.g. SBTi, GFANZ, NZIF)
4. Reviewing Corporate Governance	Integrate climate risk and sustainability into governance structures	i) Board committees for sustainability ii) Integration of climate-related assessments with financial risk management iii) Variable remuneration linked to climate objectives
5. Tracking Climate Finance	Monitor capital allocation toward sustainable initiatives regardless of financed emissions	i) Sustainable bonds issuance ii) Sustainable loans iii) Investments in clean technology

The first step emphasises collecting GHG emissions data and reduction targets, ensuring a minimum level of information to monitor net-zero commitments. To achieve this, it is recommended that the following metrics be collected: (i) historical GHG emissions (especially scope 3 and its category 15); (ii) information about GHG emission reduction targets, including reduction target rate(s), target year(s), baseline year, the use of carbon offsets to meet targets, and emissions covered by the target(s); (iii) third-party assurance of the previous information; (iv) estimated GHG emissions (especially scope 3 GHG emissions). If the information is available, all of it would ideally be specific for each material economic sector of the investee companies and financial institutions’ debtors.

The second step involves evaluating reduction targets by GHG emission scopes, focusing on assessing their ambition, comprehensiveness, and feasibility. Establishing standardised benchmarks and monitoring interim milestones for 2030 and 2050 would provide a clear pathway for tracking the progress of these targets. Using different milestones should be avoided in favour of the comparability and robustness of the analysis.

The third step consists in monitoring adherence to voluntary initiatives may be helpful to ensure alignment with credible climate action frameworks. Such initiatives can incentivise financial institutions to set near-term science-based targets, as is the case with SBTi, and provide specific methodological recommendations to ensure that targets are credible, science-based and effective. Financial institutions can also join alliances such as the GFANZ, which promotes a common approach to transition plans and recommends portfolio decarbonisation strategies in line with net-zero 2050 targets. Lastly, some initiatives, such as NZIF, support financial institutions in defining their decarbonisation path, providing a clear methodology from target setting to capital allocation. To strengthen the credibility of their commitment, institutions should be assessed on their progress toward meeting initiative milestones, emphasising tangible performance and outcomes rather than mere participation.

The fourth step entails a reviewing of climate-related risk governance is also necessary, to assess the integration of climate-related risks into financial risk management frameworks and promote the establishment of board-level sustainability committees, at least for the largest financial institutions facing climate change as a financially material risk.

A final step would be to track climate finance, including sustainable bonds, sustainable loans and investments in green technologies, to assess how capital is allocated toward sustainable initiatives.