RFI Foundation comments on TPT’s Bank Sector Guidance and CIBAFI’s Emissions Methodology
London, United Kingdom, 30 January 2024 – The RFI Foundation, C.I.C. provided detailed comment on two pivotal exposure drafts which we believe will improve the consistency, comparability and usefulness of the guidance for stakeholders of banks in OIC markets, including Islamic banks.
RFI’s comments are publicly available and aim to support and encourage development based on global baselines for responsible finance disclosure to account for implementation challenges faced by Islamic banks and other banks in OIC markets.
The RFI Foundation’s extensive experience in estimating and analysing financial climate risks across financial institutions in Organization of Islamic Cooperation (OIC) countries provides us with a unique perspective to these exposure drafts.
The first comment letter addressed the TPT’s “Banks Sector Guidance” which is strategically aligned with the International Sustainability Standards Board (ISSB) standards (IFRS S1 and S2) and draws upon the Glasgow Financial Alliance for Net Zero (GFANZ).
Key points covered in the RFI Foundation's comment on TPT's Banks Sector Guidance include:
Materiality Threshold Application: Evaluation of the effectiveness of the materiality threshold proposed by TPT and its implications for users of the guidance.
Selective Disclosures and Just Transition: Highlighting concerts about the impact of selective disclosures through materiality assessment, and the risk of incentivizing short-term actions inconsistent with the principles of a Just Transition.
Consistency in Reporting: Emphasizing the need for consistent and robust reporting standards across banks, considering variations in balance sheet sizes and complexities.
The second comment letter was on CIBAFI’s exposure draft on the “Development of a Greenhouse Gas Measurement Tool to Reinforce the Role of Islamic Financial Institutions in Supporting Climate Action” based on the standard developed by the Partnership for Carbon Accounting Financials (PCAF).
Key elements covered in the RFI Foundation’s comment on CIBAFI’s GHG Methodology include:
Alignment with PCAF Standard: Navigating the alignment of CIBAFI's methodology with the PCAF standard and emphasizing the importance of convergence.
Competitive Challenges for IFIs: Expressing concerns about potential competitive challenges for Islamic financial institutions and their implications for global responsible finance markets.
Risk of ‘Paper Decarbonization’: Highlighting the risk of "paper decarbonization" and potential inconsistencies in reporting standards poropsed for IFIs from conventional banks.
As we continue to navigate the complexities of transitioning our financial systems, the RFI Foundation encourages stakeholders to view these exposure drafts as a catalysts for positive change; the collective efforts and applications of which will propel the financial sector towards a more sustainable future.
