(Bloomberg) -- After months of stalled negotiations, banks are about to get their first ever industry standard for calculating the carbon footprint of their capital markets units.

The Partnership for Carbon Accounting Financials, a global alliance of banks and asset managers that develops climate accounting guidelines for financial services, has endorsed a proposal by its joint chairs, Barclays Plc and Morgan Stanley, according to a statement on Friday.

The agreement marks a milestone in climate finance. Assigning responsibility for so-called facilitated emissions — or those that are enabled through debt and equity underwriting — has long been a divisive subject, which is the main reason why climate accounting has so far focused on direct lending. 

“We welcome the announcement from PCAF of an industry emissions accounting standard for capital markets facilitation,” HSBC Holdings Plc said in an emailed comment. “It paves the way for alignment and robust measurement and disclosures across financial institutions, and enables science-based target setting to include capital markets activities, which are very different in nature to lending where we are providing finance on our balance sheet.”

The PCAF guidelines, which will underpin net zero plans, mean banks will be expected to disclose 33% of greenhouse gas emissions associated with bond and equity underwriting. The figure was settled on as a compromise between earlier proposals of 100% and 17%, according to people familiar with the process.

PCAF said in the statement banks also have the option to publish 100% of their facilitated emissions.

Angélica Afanador, executive director of PCAF, said the new standard for measuring capital markets emissions “marks a significant milestone in enhancing transparency within the financial sector, adding more depth and granularity to disclosures that will guide financial institutions toward informed climate action.”

The Basel Committee on Banking Supervision, which sets regulatory guidelines for the global finance industry, said this week that data on facilitated emissions “would provide useful information to market participants regarding a bank’s climate-related financial risk profile,” in connection with a consultation.

The committee, which set a Feb. 29 deadline to respond to the consultation, said it’s also seeking feedback on whether calculating emissions for “activities other than underwriting” is feasible. 

Climate activists have argued that the 33% disclosure requirement that PCAF has now settled on falls well short of what’s needed to steer capital markets away from carbon-intensive industries. 

Jeanne Martin, head of the Banking Programme at UK-based nonprofit ShareAction, said that “while we strongly welcome PCAF encouraging banks to go further, the guidelines published today are further proof that voluntary climate initiatives cannot deliver what is needed for people and planet.”

“PCAF has just given banks a get-out-of-transparency-free card by allowing them to under-report their climate impact by two-thirds for years to come,” she said.

PCAF’s standard for financed emissions, namely the carbon footprint that stems from regular loans, was released in 2020 and is now used by a growing number of institutions. Efforts to produce a standard for facilitated emissions were started a year later. 

(Adds comment from ShareAction in final paragraphs.)

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