The Luxembourg Sustainable Finance Initiative’s (LSFI) working group on climate measurement and reporting on 26 October  on climate-related tools and methodologies that financial institutions in the grand duchy could use to decarbonise and achieve net zero.

“For the transition of the financial sector towards net zero, it is necessary to understand where the sector stands today and where it needs to go by gathering data, measuring and reporting,” said Nicoletta Centofanti, LSFI general manager in a press release. She also highlighted the working group’s analysis of tools and methodologies, as well as their use, functionalities and alignment with current regulation.

Here are a few takeaways from the report.

Six key steps

The LSFI working group defined six key steps to help financial institutions reach net zero carbon emissions by 2050. These are: measuring emissions, selecting transition pathways, setting targets, taking actions, disclosing and monitoring progress.

-Measuring emissions means that organisations need to quantify their greenhouse gas emissions;

-Selecting transition pathways involves choosing a strategy to transition to a low-carbon economy and identifying sectors or initiatives that align with decarbonisation goals;

-Clear and ambitious targets need to be set in order to guide emission reduction efforts;

-Once targets are set, organisations need to actually implement actions and initiatives to reduce emissions and move towards sustainability;

-Organisations also need to be transparent and disclose their emissions, targets and actions to stakeholders;

-Continuous monitoring and assessment are essential to be sure that an organisation’s actions align with its goals.

Analysis of five tools and recommendations

The five tools examined by the LSFI’s working group were: Assessing Low Carbon Transition (ACT), Paris Agreement Capital Transition Assessment (PACTA), Partnership for Carbon Accounting Financials (PCAF), Science-Based Target Initiative (SBTi) and Transition Pathway Initiative (TPI).

Following their analysis, the working group recommended that the LSFI support Luxembourg’s financial sector by prioritising the use of PCAF and SBTi. The PCAF tool is the only one that supports institutions in measuring emissions, as well as taking action and disclosure of information, while the SBTi provides a solid methodology to select transition pathways, set targets and get ready to take action, said the LSFI in its press release.

The LSFI also plans to continue its dialogue with the financial industry and to raise awareness of the working group’s recommendations.

Members of the LSFI’s climate measurement and reporting working group, who came from Luxembourg banks, law and Big4 firms, and other institutions, included: Rudi Belli (Spuerkeess), Michael Halling (University of Luxembourg), Mathilde Bauwin (ADA), Petra Besson-Fencikova (Société Générale), Nathalie Dogniez (independent director), Anna Illarionova (EY), Martin Mager (Linklaters), Dayo Ojaleye (Innpact), Ioana Popescu (Luxembourg Institute of Science and Technology), Nathalie Roth (4Climate) and Sarah Tagliarol (Edmond de Rothschild).

Find the LSFI’s full Climate Measurement and Reporting Working Group outcome report .