More than 100 U.S. firms have stepped up to the forefront of
a voluntarily initiative with the goal of achieving net-zero emissions through
proactive measures to reduce their climate footprint. It involves a commitment
to nine principles set by the Treasury Department and the Biden-Harris administration,
which will act as a practical framework to reach this goal.
These principles are primarily focused on the scope of
greenhouse gas emissions resulting from operations financed and facilitated by
these financial institutions. By taking this proactive stance, participants
hope to not only contribute to global climate goals but also in safeguarding
businesses against climate-related risks and fostering opportunities in the
burgeoning clean energy economy.
In response to these commitments, the Treasury introduced guidance
titled, “Principles for Net-Zero Financing & Investment.” These principles
serve multiple purposes:
- They emphasize the value and importance of
financial institutions’ net-zero commitments;
- They advocate for consistency and credibility in
how these commitments are pursued; and
- They spotlight and encourage the adoption of
emerging best practices associated with these commitments.
The development of these principles drew extensively from
the existing work by private sector and non-governmental organizations, as well
as stakeholder input gathered over a year of engagement. The Treasury also collaborated
with representatives from various federal agencies and the White House during
the formulation of these guidelines. The nine principles, as described in the
guidance, are:
Principle 1: A financial institution’s net-zero
commitment is a declaration of intent to work toward the reduction of
greenhouse gas emissions. Treasury recommends that commitments be in line with
limiting the increase in the global average temperature to 1.5°c. To be
credible, this declaration should be accompanied or followed by the development
and execution of a net-zero transition plan.
Principle 2: Financial institutions should consider
transition finance, managed phaseout, and climate solutions practices when
deciding how to realize their commitments.
Principle 3: Financial institutions should establish
credible metrics and targets and endeavor, over time, for all relevant
financing, investment, and advisory services to have associated metrics and
targets.
Principle 4: Financial institutions should assess
client and portfolio company alignment to their (i.e., financial institutions’)
targets and to limiting the increase in the global average temperature to
1.5°c.
Principle 5: Financial institutions should align
engagement practices — with clients, portfolio companies, and other
stakeholders — to their commitments.
Principle 6: Financial institutions should develop
and execute an implementation strategy that integrates the goals of their
commitments into relevant aspects of their businesses and operating procedures.
Principle 7: Financial institutions should establish
robust governance processes to provide oversight of the implementation of their
commitments.
Principle 8: Financial institutions should, in the
context of activities associated with their net-zero transition plans, account
for environmental justice and environmental impacts, where applicable.
Principle 9: Financial institutions should be
transparent about their commitments and progress towards them.
Along with the principles’ release came multiple
announcements, including a $340 million commitment by
leading philanthropic organizations to support the ongoing development of
research, data and technical resources to help financial institutions develop
and execute comprehensive, voluntary net-zero commitments, according to a
Treasury press release. The funding will also support work to facilitate the
transition planning efforts of non-financial sectors of the economy.
Other organizations announced plans to
generate the necessary tools and technical work to facilitate and execute
net-zero commitments.