Länsförsäkringar Bank – Green Finance Enablement Using PCAF
Background
The Länsförsäkringar Alliance is unique in the Swedish bank and insurance market. The 23 customer-owned regional insurance companies cooperate, thereby combining the ability of a small company to adapt to its customers with the strength of a large company.
Länsförsäkringar Bank is one of Sweden’s largest banks. The strategy is based on the Länsförsäkringar Alliance’s large customer base, a strong brand and local presence through the customer-owned regional insurance companies.
Banking services are offered primarily to the 3.9 million customers of the LänsförsäkringarAlliance. Länsförsäkringar Bank have Sweden’s most satisfied customers. They are close at hand with their local presence and have an award-winning banking app for customers to manage their affairs online.
Challenge
As EBA stated in the context of COP28, the transition to a climate-neutral, climate-resilient and more sustainable economy raises challenges and opportunities for the real economy and the banking sector. Fostering an orderly transition will be a key driver towards Europe’s banking sector’s resilience and financial stability.
The starting point for the sustainability efforts of Sweden’s largest insurance company, Länsförsäkringar, is a local and long-term responsibility in society. Climate change represents our largest risk and we see an increase in natural catastrophes affecting our customers, such as drought, wild fires, storms and heavy rains. In March 2023 Länsförsäkringar Bank signed a partnership with PCAF, committing to report and disclose its financed emissions to contribute to increasing transparency across financial sector.
PCAF is a global partnership of 485 financial institutions having a harmonized approach to assess and disclose the greenhouse gas emissions associated with their loans and investments.
Länsförsäkringar Bank asked Advisense to drive the implementation of PCAF methodology within the bank and establish a strategic solution for analysis and reporting of financed emissions.
Solution
Together with Länsförsäkringar Bank, Advisense organised a collaborative project team, pooling together all the combined knowledge necessary for the challenge. Advisense outlined the project, managed the implementation and provided risk analysis and ESG knowledge, working closely together with risk analysts and management within the line organisation. Advisense also oversaw the development needed from internal IT, delivering in accordance with the Scaled Agile Framework (SAFe).
Together, we created a strategic solution managing that climate data evolves over time, yet still produces consistent financed emissions data over an extended period. The strategic solution addresses uncertainties and allows efficient management of data attributes at the core of the solution
The financed emissions data will be the foundation for current and future regulatory reporting requirements, analysis and stress tests, and must, therefore, be accurate and possess full data lineage and consistency over time.
While PCAF calculation models are relatively straightforward, the framework necessitates a structured solution to manage the dynamics of data availability. Data input is key, and the solution must be resilient to missing or incorrect data, that otherwise could impact output significantly.
Early analysis of information availability was pivotal in defining the target solution and outlining the development roadmap. The dynamic nature of climate reporting and PCAF as a framework requires an agile approach, involving a cross functional team. Prototyping with a structured approach was crucial to establish the solution design and requirements. The strategic solution addresses uncertainties at the core of the solution design.
Result
With the implementation of the new strategic solution for calculating financed emissions, Länsförsäkringar Bank is poised to enhance its position as a leading bank within the Nordics.
This advancement enables the bank to effectively report and disclose financed emissions, thereby fostering increased transparency across the financial sector. Moreover, this solution serves as a cornerstone for assisting customers in aligning their homes and businesses with climate-related objectives.
Implementing good practices of full transparency and establishing a fast feedback loop allowed us to swiftly steer the project in the right direction.
Wilhelm Cronholm, Head of Risk Control, Länsförsäkringar Bank
The team demonstrated forward-thinking by proposing features such as a recalculation policy at the heart of the solution. This proactive approach ensures that the solution can effectively manage the evolving nature of climate data over time.
Marie Frentz, Head of Risk Modelling, Länsförsäkringar Bank
I do want to add that I am extremely impressed with how Advisense has navigated the project, and the competence and experience have truly been crucial! Many thanks!
Tobias Ternstedt, CIO, Länsförsäkringar Bank
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