Rationale and Design of a Scope 3 Capital Charge

• Davide Trevisani ; José Germán López Salas ^[1] ; Chris Kenyon ; Carlos Vázquez ; Mourad Berrahoui
  1. [1] Universidade da Coruña

     Universidade da Coruña

     A Coruña, España

     
• Localización: VI Congreso XoveTIC: impulsando el talento científico / coord. por Javier Pereira-Loureiro , Manuel Francisco González Penedo ; Manuel Lagos Rodríguez (ed. lit.), Álvaro Leitao Rodríguez (ed. lit.), Tirso Varela Rodeiro (ed. lit.), 2023
• Idioma: inglés
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• Resumen

  • Climate change is caused by greenhouse gas emissions, and governments have introduced over seventy carbon pricing instruments (CPIs). Banks finance a significant fraction of global emissions, and many have committed to reduce their facilitated, or Scope 3, emissions to (net) zero by 2050. However, it is possible that governments will introduce a CPI impacting banks on their Scope 3 emissions earlier. Here we design a Scope 3 capital charge to make banks resilient against the possibility, albeit not certainty, that governments could introduce such a Scope 3 CPI. Based on interest rate swaps, our numerical examples are financially significant for counterparties with significant emissions. The contribution of this work is to provide a technical basis for banks to be sufficiently resilient