Carbon Performance for Banks methodology note - version 1.0

The Carbon Performance for Banks methodology note - version 1.0 outlines how banks are assessed for their alignment with global climate targets, including the Paris Agreement. The methodology extends TPI’s Carbon Performance framework to the financial sector, enabling investors to evaluate how banks’ financing activities and sectoral exposures align with the transition to a low-carbon economy.

Using the Sectoral Decarbonisation Approach (SDA), the framework translates global emissions-reduction goals into sector-level benchmarks and compares these with the emissions intensity of banks’ financed activities (Scope 3 Category 15 emissions). It assesses how banks’ lending and investment portfolios align with decarbonisation pathways across high-emitting sectors, providing a forward-looking view of transition risk and alignment.

The methodology introduces a Carbon Performance Alignment Matrix and sets out clear rules for emissions boundaries, data sources and target assessment, using publicly disclosed data to ensure transparency and comparability. By linking bank financing to real-economy emissions pathways, it provides a robust framework for assessing the carbon performance and climate alignment of banks.