Banks’ hidden role in the carbon footprints of large corporations

Many large U.S. corporations have made specific pledges to reduce their greenhouse-gas emissions as part of the fight against climate change. For example, Microsoft has pledged to cut its emissions by more than half over the next eight years.

But a new report by sustainable finance activists argues that the emissions associated with big companies’ cash holdings — and specifically how banks invest and lend those funds — are underreported in climate-related disclosures.

The findings add to an ongoing debate over how to measure greenhouse-gas emissions in the corporate sector. The report’s authors argue that large corporations have leverage over what banks do with their money — and could pressure them to finance less carbon-intensive activity — because of the possibility that the companies could move their funds.

Salesforce, Microsoft and Meta are all cited in a new report as examples of corporations where financed emissions make up a large percentage of total emissions.


The report looks at the total emissions profile of 10 large U.S. corporations that have made climate pledges. For five of them, their total emissions increase by 91% to 112% when their financed emissions are included, according to the report.

“What this report finds is that the largest source of emissions for many of the world’s largest companies is in fact their bank of choice,” said Vanessa Fajans-Turner, executive director of BankFWD, one of three sustainable finance advocacy groups that sponsored the research.

The report’s release comes at a time of increasing pressure on both banks and corporations to account for their contributions to climate change. 

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Shareholder activists are pushing for more disclosures about how business activity impacts the environment, while regulators are weighing a new rule proposal that would make some disclosures mandatory. At the same time, some banks and corporations are making pledges to reach carbon neutrality across their portfolios by 2050.

The Carbon Bankroll report, released earlier this week, relied on a methodology developed by South Pole, a climate-focused investment advisor. Andres Casallas, the group’s director of sustainable finance, called it an “indicative” methodology that uses publicly available regulatory information to estimate a company’s financed banking emissions.

“What we looked to understand was not that cash has zero emissions just because it sits in banks, but rather that, to some extent, it will be reinvested or used for lending activities,” Casallas said. “When you hold cash and cash equivalents, there is still an aspect of emissions being financed.”

Microsoft has $130 billion in cash and investments, which generate financed emissions “comparable” to the manufacturing, transportation and global use of every product offered by the Redmond, Washington-based tech giant, the report found.

Other companies highlighted in the report include Salesforce and Facebook’s parent company, Meta. When their financed emissions are included in the analysis, Salesforce’s total emissions increase by 91%, while Meta’s more than double, according to the report, which was sponsored by Climate Safe Lending Network and The Outdoor Policy Group, in addition to BankFWD.

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A Microsoft spokesperson declined to comment. Spokespeople for Meta and Salesforce did not respond to a request for comment.

Companies’ cash holdings at banks are “an undocumented, untracked component” of their carbon footprints, said Fajans-Turner of BankFWD.

Financed emissions “have been marked as optional reporting to date because there has been no methodology for calculating the impact of cash and investments,” she said.

The report’s findings suggest there is a “potential gap” in corporate emissions reporting, said Pankaj Bhatia, director of GHG Protocol, an organization that provides widely-accepted climate reporting guidelines.

“We have understood from corporations that they have not accounted for this type of emission because they are not in the financial sector,” Bhatia said.

He added that reporting financed emissions can provide corporations “leverage they can exercise through their cash positions to influence banks.”

Spokespeople for the American Bankers Association and the Bank Policy Institute declined to comment.

Banks have pushed back on the “tricky business” of reporting the financed emissions of corporate cash holdings because they are cautious about passing information to their clients that’s dependent on measurements collected at the portfolio company level, said Clifford Rossi, a professor at the University of Maryland School of Business.

“I can’t imagine having to wrap my arms around the types of information for all the levers we need at a company level to do that on a reliable basis,” said Rossi, a former chief risk officer at Citigroup and the founder of the consulting firm Chesapeake Risk Advisors.

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Chris Marinac, director of research at the financial services firm Janney Montgomery Scott, said that ongoing conversations about emissions reporting has “given clarity to formalizing the process” around what information should be disclosed.

“Banks are going to comply with what state and federal regulators ask them to do,” Marinac said. “However, I think that if there’s a good credit to be loaned, and there’s a deposit to take, banks are going to do it.”

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