CIMS vs. NZBA climate target setting: Cross-fertilizing best practices
This report compares the NZBA and CIMS methodologies for climate target setting and identifies best practices for optimizing the mitigation of GHG emissions. By examining their differences and commonalities, the authors provide recommendations and suggest that combining the two frameworks could create a robust joint disclosure framework.
Please login or join for free to read more.
OVERVIEW
This report compares the Net Zero Banking Alliance (NZBA) and Climate Impact Management System (CIMS) methodologies for climate target setting. The authors note the lack of a global, standardized disclosure framework for climate targets among financial institutions. The report examines their differences and similarities and provides recommendations for optimising the mitigation of GHG emissions. The authors suggest combining the two frameworks could create a joint disclosure framework.
The rise of net-zero alliances
While there has been a general global rise in financial sector initiatives to incorporate environmentalism, few regulations initially existed. The report notes this led to numerous informational and ethical propositional tools. It includes such regulations as French Art 173 in 2014 and the Sustainable Finance Action Plan in 2018. Today, there exists investment-based initiatives like Carbon Tracker’s reports and informational efforts.
NZBA vs. CIMS
The NZBA and CIMS methodologies share many commonalities, including both being voluntary climate-management tools and supporting orderly transitions. However, the frameworks differ in their approaches to setting targets. The NZBA’s target-setting guidelines centre on portfolio alignment goals, collective action and utilize established climate scenarios. Alternatively, the CIMS framework utilizes Maximum Impact Potential which centres on optimization of the contribution to governments, real-world changes and tangible improvements.
NZBA: Challenges and controversies
Though the NZBA has its merits, the report indicates some challenges. Firstly, its establishment of net-zero practices as mere single comparatives within a set of numerous measures, whereby reporting fails to capture accurate GHG reductions from a whole portfolio. There are also non-compliance suggestions, operational challenges and the perception of ineffective net-zero pledges.
Recommendations
The authors recommend combining the two frameworks while following NZBA guideline 2 where banks and FIs must provide an emissions baseline for all portfolios which then quantifies GHG emissions reductions in regards to climate impact. This approach would create a robust, joint disclosure framework for industry-wide adoption.
