The way we transact in the global markets is fundamentally shifting.
This is what Heather Buchanan, Co-founder and CEO of Bankers of Net Zero (B4NZ) told us in this week’s Net Hero Podcast.
‘If banks have committed to decarbonising their finance emissions by 2050. This means that they’re on the hook for understanding and decarbonising every asset that they’ve financed.
‘So every single mortgage, every business loan, every small business loan, every corporate loan and the corporate’s entire supply chain.
‘And so they need to understand data that they haven’t had before.’
However, Heather said that the sector still has a long way to go.
‘In 1494, the first book on modern accounting was published.
‘So we’ve had just over 500 years where we’ve all gotten used to what is value and what is risk.
‘But at no point along the way has carbon, climate change, nature depletion, nature restoration, any of these things been built into those metrics. So there’s a lot of work to be done.’
She told us that banks and customers will need to understand carbon data for future transactions.
‘Most businesses will be used to giving banks their profit, loss, cash flow forecast, balance sheets, etc.
‘But carbon is now going on to that at a very basic level.
‘For example, if you’re a farmer who supplies to four supermarkets and you’ve got two bank accounts. You’re potentially being asked for six different sets of information in six different formats, with six different calculators that give you six different answers.
‘And so to a certain extent, a lot of the basics haven’t actually been agreed on yet.’
Heather said that B4NZ will help the financial sector and customers plan their transition.
‘So we’re working really hard to make sure that SMEs in a real economy can still speak to the financial economy.
‘This is where things like transition planning comes in. So it’s not just about financing green projects but how do you support businesses that need to decarbonise and that sometimes requires investment.
‘Otherwise, I would say banks could be net zero tomorrow if they wanted to. They just would need to get rid of all their customers.’
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