The US Treasury has unveiled the Principles for Net-Zero Financing & Investment, a set of voluntary guidelines designed to outline best practices for private sector financial institutions that are committed to achieving net-zero emissions, as reported by ESG Today on September 19. These principles provide a structured framework for financial institutions, urging them to align their net-zero commitments with the critical objective of limiting the global average temperature rise to 1.5°C. Additionally, financial institutions are encouraged to actively support their clients and portfolio companies in their pursuit of net-zero emissions goals. To ensure a comprehensive approach, institutions are advised to develop clear transition plans that encompass specific practices, targets, and metrics aimed at achieving net-zero emissions. These plans should also consider the use of transition finance, the phased reduction of high-emission assets, and the adoption of climate solution practices in the pursuit of their commitments.

The introduction of these voluntary principles by the US Treasury is a strategic move to mobilize more capital from the private sector. The goal is to address the physical and economic impacts of climate change while seizing the economic opportunities associated with the green transition. These principles have garnered immediate support from promonent philanthropic organizations, including Bezos Earth Fund, Bloomberg Philanthropies, Climate Arc, ClimateWorks Foundation, Hewlett Foundation, and Sequoia Climate Foundation. These organizations have committed USD340m over three years to support various initiatives such as research, data availability, and resources that will facilitate the realization of financial institutions’ net-zero commitments. In response to the US Treasury’s call, the Glasgow Financial Alliance for Net Zero (GFANZ) has announced that over 50 US financial institutions, and more globally, will release their net-zero transition plans in the coming year. These plans will adhere to voluntary common frameworks developed by GFANZ and various financial sector alliances, demonstrating a widespread commitment to addressing climate change within the financial industry.

Sources:

https://www.esgtoday.com/u-s-treasury-releases-principles-for-net-zero-commitments-by-financial-institutions/

https://home.treasury.gov/news/press-releases/jy1744

https://www.reuters.com/sustainability/sustainable-finance-reporting/us-treasury-banks-net-zero-pledges-must-align-with-temperature-limits-2023-09-19/