New principles designed to ensure that finance companies’ net-zero commitments are backed up by “credible” targets have been published by the US Treasury.
Aimed at ensuring that the likes of banks actually meet targets to limit global temperature increases to 1.5C, the Treasury released the proposed rules on Tuesday.
“In the face of the increasingly severe climate crisis, the principles are being released in the context of extensive actions taken by the Biden-Harris administration to reduce emissions,” the department wrote.
“[They will] enable financial institutions, non-financial companies, communities, and workers to benefit from the new clean energy economy.”
Transparency and published plans were key factors of the nine-point list, which was presented as world leaders and bosses met at the UN General Assembly in New York.
While speaking to the likes of BlackRock boss Larry Fink and HSBC's Noel Quinn, Treasury secretary Janet Yellen said the rules could set shared expectations for companies.
"Following the principles is, of course, voluntary, but many of those in this room are taking or have already taken actions consistent with some of the best practices,” she said.
"For those that haven’t, we think they can be useful in clarifying what to consider."
Summary of the principles:
- 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.
- Financial institutions should consider transition finance, managed phaseout, and climate solutions practices when deciding how to realize their commitments.
- 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.
- Financial institutions should assess client and portfolio company alignment to their targets and to limiting the increase in the global average temperature to 1.5°C.
- Financial institutions should align engagement practices — with clients, portfolio companies, and other stakeholders — to their commitments.
- 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.
- Financial institutions should establish robust governance processes to provide oversight of the implementation of their commitments.
- Financial institutions should, in the context of activities associated with their net-zero transition plans, account for environmental justice and environmental impacts, where applicable.
- Financial institutions should be transparent about their commitments and progress towards them.