What are financed emissions?

Financed emissions refer to greenhouse gas emissions that are associated with the lending and investment activities of financial institutions. This concept recognizes that financial institutions, such as banks and investment firms, have a significant impact on the carbon footprint of the projects and companies they finance. When these institutions provide loans, underwrite bonds, or invest in equity, they are indirectly contributing to the emissions generated by those entities or projects.

The correct choice highlights the importance of understanding the broader scope of responsibility that financial institutions have in addressing climate change. By measuring financed emissions, these institutions can assess the environmental impact of their portfolios and drive efforts towards more sustainable investments.

The other options do not accurately capture the definition of financed emissions. Manufacturing processes, transportation sectors, and renewable energy sources represent specific categories of emissions but do not reflect the wide-ranging implications of financing activities within the financial sector.