Towards a new methodology for assessing abatement progress across financial institutions’ transition plans

Methane abatement is a high-impact, underfinanced climate lever, and financial institutions (FIs) are key to driving related investment. Methane accounts for approximately 29% of historical warming and is over 80 times more potent than CO2 in terms of near term warming impact (ESSD, 2020). Despite the existence of cost-effective abatement technologies – such as pipeline leakage detection and waste-to-energy plants – finance for these solutions remains far below what is required, particularly within the oil and gas and agrifood sectors. Given financial institutions’ key role in driving capital allocation and corporate engagement, it is imperative that their transition plans fully account for the risks associated with inaction on methane and signal to the market that opportunities to mitigate these emissions exist.

To assess FI action on methane, CPI undertook a preliminary review of the transition plans and climate disclosures of 10 leading banks and institutional investors. We evaluated their action across two dimensions:

• Targets: intention to act on methane abatement
• Implementation: whether methane abatement measures are factored into decision-making

Key findings

• Limited overall action: The majority of the FIs evaluated have only just begun to integrate methane into their transition plans.
• Weak target setting: Only 3 of the 10 FIs demonstrate action on methane-related targets, with many failing to disclose sectoral coverage, baselines, or strategies to achieve targets.
• Stronger but uneven implementation: 7 of the 10 FIs demonstrate action across the implementation dimension, with disclosure of methane risk and policy engagement on methane two prominent areas where this was observed.
• Disparity between sectors: Action is especially limited in agrifood systems, where the 10 FIs’ financed methane emissions remain largely unaddressed. In contrast, stronger action was observed for the oil and gas sector, where further improvement is contingent upon the adoption of enhanced emissions measurement techniques.

To credibly align with net-zero pathways, FIs must not only make high-level commitments, but also set quantifiable, time-bound sector-specific methane targets linked to their financed emissions. Methane considerations should also be embedded into risk management and client engagement processes. With few current leaders, FIs that disclose greater action on methane through their transition plans can demonstrate accountability and reduce their transition risks associated with financing these emissions.

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