What are Financed Emissions for Land?
Financial institutions are increasingly exposed to nature-related risks, including deforestation, biodiversity loss, and emissions from their financial ties to the Forestry, Land Use, and Agriculture (FLAG) sectors. These risks can disrupt supply chains, erode portfolio value, and undermine long-term market stability. However, innovative technologies now enable these companies to measure and manage financed emissions in the land sector, providing actionable insights to mitigate risk, enhance resilience, and align investments with sustainable outcomes.
Beyond compliance with rising regulations like the EU Corporate Sustainability Reporting Directive (CSRD), the larger issue is safeguarding economic stability and market longevity; addressing nature-related risks is a business imperative to ensure the stability of the ecosystems that support global economies.
The Hidden Giant: Transforming Risk into Resilience
Taking a step back, “financed emissions” are the greenhouse gas (GHG) emissions tied to the lending and investment activities of financial institutions. These emissions—classified under Scope 3, Category 15 of the Greenhouse Gas Protocol—are often hundreds of times larger than an institution’s direct (Scope 1) or indirect (Scope 2) emissions.
Why do Financed Emissions Matter?
As global regulations tighten, understanding financed emissions is no longer optional—it’s a necessity. Addressing them unlocks:
- Overall Readiness: Assess investment emissions, generate audit-ready reports, and scenario planning for optimal financial performance.
- Business Opportunities: Prioritize areas for value creation and risk mitigation while preparing internal processes in alignment with climate-related risks.
- Reputation Protection: Meet stakeholder expectations, aligning with Corporate Sustainability Reporting Directive (CSRD) and Partnership for Carbon Accounting Financials (PCAF) principles while avoiding greenwashing with rigorous scientific methodologies.
In fact, on average, 92% of financial institutions’ value chain are scope 3 emissions. For banks, insurers, and investment firms with exposure to land and agriculture, financed emissions are the silent behemoth threatening the planet and continued economic growth.
Land Use: Portfolio Opportunities for Net Zero
The land sector is both a carbon sink and a major emitter. Forest, Land-Use and Agriculture (FLAG) activities are responsible for nearly a third of global GHG emissions. This outsized impact underscores the critical need to understand and manage these emissions effectively.
“To avoid catastrophic climate change, the land sector must reach net zero emissions by 2030.”
—Exponential Roadmap for Natural Climate Solutions
For financial institutions, portfolios tied to these sectors carry complex risks and opportunities, particularly when FLAG activities are associated with deforestation. Commodity-linked deforestation, in which land is converted from forest to cropland, is high in regions like Brazil, Latin America, and Southeast Asia, particularly for crops like cattle and palm oil. Such activity is associated with biodiversity loss and accelerated carbon emissions. This has earned these crops regulatory scrutiny under frameworks like the European Union Deforestation Regulation (EUDR).Banks and lenders must address these risks to protect their portfolios, align with climate commitments, and maintain stakeholder trust.For financial institutions, land-sector risks are multi-dimensional:
- Scope 3 Magnitude: With 92% of emissions in the financial sector tied to complex calculations tied to FLAG.
- Regulatory Pressure: Emerging requirements, like the CSRD, and other frameworks demand robust emissions reporting and mitigation strategies.
- Portfolio Vulnerability: Loans tied to high-risk geographies or commodities expose institutions to significant credit and environmental risks—risks that are heightened because loans remain on lenders’ books for years and even decades.
From Trustworthy Data to Accountable Action
Managing land-sector financed emissions begins with a comprehensive understanding of portfolio emissions and drivers, but it doesn’t stop there—financial institutions must transition from awareness to measurable motion.
At FLINTpro, we bridge the gap between complex data and actionable business drivers. Our team—which includes contributors to the IPCC and GHG Protocol—ensures that your transition strategies are grounded in science and built for impact.
“We’re working with several financial institutions who are reviewing financed emissions at a portfolio level down to the loan, asset, farm or field. Our technology is improving internal processes to ensure multiple reports are leveraging our high-quality data coupled with transparent methodologies. Think about a platform that automates a full team of climate-leading scientists, analytics and models using the best-available data.”
—Tina Morris, FLINTpro CEO
Ready to Take the Next Step?
The financial sector has a unique opportunity to understand their land-sector financed emissions and FLINTpro is here to provide deeper insights for you and your business.
By incorporating nature-positive strategies, you can protect your portfolio from high-risk investments while understanding how to reach global decarbonization goals. Schedule a demo today: https://www.flintpro.com/contact