Corporates can ensure that banks don’t use their money to fund emissions. Here’s how.

A new guide highlights actions companies can take to measure and reduce the hidden carbon footprint of corporate cash holdings in banks 

Emissions generated by how banks manage corporates’ cash holdings can significantly add to a company’s greenhouse gas emissions, but currently escape reporting. A new guide detailed actions companies can take to reduce these emissions and by doing so support accelerating the decarbonisation of the financial sector. The Greening Cash Action guide examined a critical yet overlooked driver of corporate greenhouse gas emissions – the emissions associated with how banks manage and repurpose the cash deposits of their corporate clients for emission-producing activities. 

If emissions from corporate cash holdings in the bank were counted, many businesses would see a notable surge in their overall greenhouse gas emissions. The  guide provided actionable advice for how climate leading companies can be frontrunners in recognising, measuring and mitigating these emissions.  

Beyond their organisational inventory, corporations may not realise the emissions financed by their cash. The guide outlined actions companies can take to assess and curtail emissions associated with how banks manage their corporate cash. By proactively engaging with their banks and encouraging better data disclosure and climate practices, companies can use their role as corporate customers to send important market signals to their banks to reduce the carbon intensity of their loan and investment portfolios, which, in turn, helps accelerate the broader decarbonisation of the financial system. Companies can start decarbonising their financial operations by asking their banks to shift some of the company’s cash into “green” financial cash management products such as green deposits, the guide added.

The guide was developed for business leaders, financial officers and sustainability managers. “Companies have to reduce emissions along their full value chain and that includes emissions in their financial supply chains. This guide gives practical and actionable recommendations on how to measure and reduce the emissions they indirectly finance through their cash holdings in the bank,” said Johan Falk, CEO and co-founder, Exponential Roadmap Initiative and one of the authors of the guide.

According to the authors, the guide addressed a problem that they encountered while talking to the wealthiest companies in the world— “lack of awareness of the magnitude of these cash emissions and what to do about them”.

“Companies committed to driving climate progress have left a major lever on the table — namely, their power and influence on banks as major clients. By using this guide, companies can take steps to ensure that the banks that get their business are using company cash in ways that support and don’t undercut a company’s wider climate goals. This guide will help to cement climate safe banking as a new pillar of corporate sustainability and net zero planning,” said Allison Fajans-Turner, managing director, BankFWD, and a co-author of the guide. 

The guide also recommended corporates setting a goal to move a certain percentage of their cash to banks that are more climate friendly and socially responsible.

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