When banks talk about climate strategy, they often highlight the emissions they control, such as energy use, offices, and company cars. Yet these account for less than 5 percent of their total footprint. The remaining 95 percent comes from the businesses they finance.
These financed emissions, the greenhouse gases tied to loans and investments, are now the real test of sustainable banking. Progress remains slow not because of a lack of ambition but because of a deeper problem: missing data.
The Invisible Majority
Regulators and investors now expect banks to disclose financed emissions and align portfolios with net-zero goals. Frameworks like PCAF and the EU Green Asset Ratio depend on consistent company-level data, which most unlisted SMEs do not provide.
In the UK, TDH research shows that the majority of firms with £2 million to £100 million turnover publish little or no ESG disclosure. Banks are left to estimate, guess, or chase data manually, which is costly and unreliable. The result is credit models built on assumptions, undermining both regulatory confidence and real risk visibility.
The Regulatory Tightrope
Supervisors such as the ECB and the Bank of England have made financed emission transparency non-negotiable. Yet most banks lack the datasets to comply. The danger is twofold: failing disclosure standards and mispricing transition risk because of incomplete information. Green banking risks being derailed by data deficiency.
Seeing the Unseen
When data is patchy, banks often focus on large corporates and overlook SMEs, even though they form the economic backbone and collectively emit much more. This skews stress tests, distorts green-loan allocation, and weakens client engagement. Relationship managers cannot advise on what they cannot measure.
Closing the Gap with TDH
TDH’s low-touch, value-based engagement model helps fill this data gap. Using AI-assisted ESG profiling, TDH analyses public disclosures, digital footprints, and contextual signals from thousands of UK companies. SMEs validate or enrich profiles instead of starting from zero.
For banks, this means:
- Portfolio-wide financed emission mapping even where no formal disclosures exist.
- Faster, cheaper data validation with pre-filled surveys.
- Better client engagement through decision-ready sustainability insights.
Integrating TDH’s system into credit and sustainability workflows turns ESG data from a reporting burden into a risk management advantage.
Data Is the New Capital
The future of green banking will be decided not by ambition but by information. Financed emissions are where real climate risk lives, and most banks still lack visibility. Closing the data gap is both a regulatory imperative and a competitive advantage.
Seeing the emissions you finance, not just the ones you emit, is where sustainable banking truly begins.
