TD Bank pledges net-zero carbon emissions by 2050

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TD Bank Group is aiming for net-zero greenhouse gas emissions from its financing activities and operations by 2050, in alignment with the Paris Agreement.

To do that, the Toronto company said Monday it needs to quantify emissions made by its borrowers. It plans to determine the baselines, or current amounts, of emissions by each sector in its loan portfolio.

That information will help the $1.3 trillion-asset TD advise its corporate clients how to reduce their carbon footprints. It will also help TD more accurately calculate its credit exposure to a transition away from fossil fuels, according to Nicole Vadori, head of environment, who added that TD's own operations have been carbon neutral since 2010.

“We need to set our baseline, not only for our own operations, but also for our financed emissions. Once we do that, we can then start breaking down that 2050 target into manageable chunks,” she said. “Financed emissions will also serve as a basis for our transition risk assessment within our climate-risk analysis.”

As part of the effort, TD has joined the Partnership for Carbon Accounting Financials, a global consortium of banks working on standardized carbon accounting methodologies. TD Bank also set up a sustainable finance group and pledged not to finance any new oil-and-gas production in the Arctic Circle. The pledge announced Monday builds upon prior work TD has done, including a commitment to financing clean tech and energy.

TD has company in those efforts, as greater public awareness, increased pressure by activist shareholders and the rising cost of serious climate events are pushing banks to more closely scrutinize their environmental impact. Citigroup, Bank of America and Morgan Stanley are also members of the PCAF, for example. Goldman Sachs has pledged not to finance any new oil exploration in the Arctic.

Data measurement and analytics will be critical to achieving net-zero emissions over the next three decades, but data quality can be a challenge, Vadori said. Some corporate clients already provide information about their greenhouse gas emissions, but some don’t. The ones that do don’t necessarily use the same set of disclosures, so bankers working behind the scenes aren’t necessarily looking at an apples-to-apples comparison, she said.

Vadori said the company will start by using carbon-accounting methodology developed by PCAF, which looks at six asset classes, including commercial real estate, residential mortgage and project finance.

Within the TD Securities unit, the company set up a sustainable finance and corporate transitions group intended to advise and finance corporate clients in their own sustainability efforts.

“Each [sector] has challenges and opportunities in the transition to a low-carbon economy,” Vadori said. “We need to think about what that unique pathway looks like for something like, say, mining or power generation.”

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