The U.S. Department of the Treasury has released a set of guidelines called the “Principles for Net-Zero Financing & Investment.” These principles are voluntary and serve as a guide for private sector financial institutions that have committed to achieving net-zero emissions. They aim to promote consistency and credibility in how these commitments are put into practice.
The Treasury Department’s goal with these principles is to encourage more private sector investment in addressing the challenges posed by climate change, both in terms of its physical impacts and economic opportunities. The transition to a greener economy is seen as a significant chance for growth and innovation.
Key announcements alongside the release of the Principles include:
- Philanthropic organizations including Bezos Earth Fund, Bloomberg Philanthropies, Climate Arc, ClimateWorks Foundation, Hewlett Foundation, and Sequoia Climate Foundation, announced a $340 million commitment over the next three years to support the continued development of research, data availability, and technical resources intended to help financial institutions develop and execute robust, voluntary net-zero commitments. This funding will also support work to facilitate the transition planning efforts of non-financial sectors of the economy.
- The Glasgow Financial Alliance for Net Zero (GFANZ) announced that more than 50 U.S. financial institutions – and more globally – will independently publish net-zero transition plans over the next year using the voluntary common frameworks developed by GFANZ and financial sector alliances. In addition, the GFANZ Secretariat launched a 45-day consultation on its work to further refine the definitions of its transition finance strategies and support financial institutions in forecasting the impact of these strategies on reducing emissions, with a final report to be released at COP28.
- The Rocky Mountain Institute (RMI) Center for Climate-Aligned Finance (CCAF) will launch frameworks for the aluminum and aviation sectors to help lenders measure and disclose their lending-related portfolio emissions for these sectors, which each account for 2 percent of global emissions per year. The frameworks will launch in December 2023 for aluminum and January 2024 for aviation. In addition, RMI will launch a new Transition Finance Resource Hub in 2024 which will include a series of how-to guides to help banks overcome barriers to mobilizing transition capital.
- The Partnership for Carbon Accounting Financials (PCAF) will train and support up to 2,500 financial industry professionals on greenhouse gas accounting methodologies and reporting through its new PCAF Academy. PCAF also plans to publish the first-ever standard for facilitated emissions later this year. The standard will cover capital markets transactions and provide the finance sector with a harmonized method to measure the climate impact of those transactions and a metric that enables them to set science-based targets and inform strategies for transition finance.
- The Center for Climate and Energy Solutions (C2ES) announced it will work with over a dozen large, publicly traded companies across sectors to develop insights on how they are developing and communicating their net-zero transition plans to their investors, policymakers, and the public. Over the next three years, this effort will support the development of businesses’ net zero transition plans, identify interdependencies between industry sectors’ decarbonization efforts, and will inform the efforts of financial institutions as they engage with clients and portfolio companies.
- Ceres has committed to working with over 250 investors and companies on their net-zero transition plans over the next year, including by helping firms develop specific milestones for progress and providing resources, one-on-one advice, and workshops to support plan development.
In addition to the release of these principles, various civil society organizations have made significant commitments, including a $340 million pledge from leading philanthropic organizations. This funding will be used to further research, data availability, and technical resources that help financial institutions establish and execute robust, voluntary net-zero commitments. It will also support transition planning in non-financial sectors.
The climate crisis is driving a substantial economic shift, affecting vulnerable countries and communities the most. There is a growing demand for technologies, products, and services that reduce greenhouse gas emissions, promote clean energy, and adapt to a changing climate across all industries. This demand is fueling the growth of new sectors and business models.
While government support plays a role in this transition, a key part of its success relies on the private financial sector allocating resources and expertise to those building the clean energy economy. The Treasury’s Principles are designed to facilitate this transition and support its growth.
View the full report: “Principles for Net-Zero Financing & Investment”
Date: September 19, 2023
Source: US Treasury Press Release
