U.S. Treasury unveils principles for climate-conscious financial institutions


The U.S. Treasury has officially released its “Principles for Net-Zero Financing & Investment”.

This release aims to offer a robust set of best practices and foster a sense of uniformity and trustworthiness for private sector financial institutions as they define and chase their net-zero objectives.

These principles have been introduced on a voluntary basis and are chiefly concentrated on financial institutions’ Scope 3 financed and facilitated greenhouse gas (GHG) emissions. It’s pertinent to note that these emissions often represent the lion’s share of a financial entity’s carbon contribution.

The Treasury has conveyed that a significant economic transformation is on the horizon, primarily steered by the ongoing climate crisis. This shift is prompting a surge in demand for technologies, goods, and services associated with reducing GHG emissions. There is also a growing interest in clean energy solutions and climate adaptation across various sectors.

This evolving demand is propelling the inception and expansion of fresh industries and business paradigms. Nevertheless, the Treasury has highlighted that the creation and nurturing of these budding industries will necessitate a private financial system that progressively channels more capital and expertise to enterprises and individuals steering this clean energy revolution.

The Treasury’s statement further emphasised: “The Principles that Treasury is unveiling are intended to support this growth.”

The document features a total of nine Principles. These Principles mandate that the net-zero objectives set forth by financial institutions should harmonise with the aim of capping the upswing in the global average temperature to 1.5°C. Moreover, these objectives must be supported by a thorough net-zero transition strategy. Financial institutions are further directed to develop trustworthy metrics and goals for all pertinent financing, investment, and consultation services.

Additionally, they are encouraged to synchronise their engagement techniques with client and portfolio firms based on their net-zero promises and to maintain transparency regarding their objectives and the journey towards achieving them.

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