The U.S. Treasury has officially unveiled its “Principles for Net-Zero Financing & Investment” with the goal of providing a robust set of best practices and promoting consistency and credibility among private sector financial institutions as they define and pursue their net-zero objectives.
These principles have been introduced on a voluntary basis and primarily focus on financial institutions’ Scope 3 financed and facilitated greenhouse gas (GHG) emissions. It’s important to note that these emissions often constitute a significant portion of a financial entity’s carbon footprint.
The Treasury acknowledges that a significant economic transformation is on the horizon, largely driven by the ongoing climate crisis. This transformation is leading to increased demand for technologies, products, and services related to GHG emissions reduction, clean energy solutions, and climate adaptation across various sectors.
This growing demand is giving rise to new industries and business paradigms. However, the Treasury emphasizes that nurturing these emerging industries will require a private financial system that increasingly directs more capital and expertise to entities and individuals driving the clean energy revolution.
The Treasury’s statement underscores that “The Principles that Treasury is unveiling are intended to support this growth.”
The document outlines a total of nine Principles. These Principles require that the net-zero objectives set by financial institutions align with the goal of limiting the global average temperature increase to 1.5°C. Financial institutions are further urged to develop credible metrics and targets for all relevant financing, investment, and advisory services.
Moreover, they are encouraged to align their engagement strategies with clients and portfolio companies based on their net-zero commitments and maintain transparency regarding their objectives and progress toward achieving them. These principles aim to provide guidance and a framework for financial institutions to contribute meaningfully to the global efforts to combat climate change and transition to a net-zero economy.
By FCCT Editorial Team
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