WASHINGTON – In releasing a new guide titled “Principles for Net-Zero Financing & Investment,” the Treasury Department is saying financial institutions should develop net-zero “transition plans.”
According to Treasury, the voluntary Principles highlight emerging best practices for private sector financial institutions that have made net-zero commitments and promote consistency and credibility in approaches to implementing them, Treasury stated.
Treasury Secretary Janet Yellen has long been an advocate for climate-related action, including during her term with the Federal Reserve. The Biden Administration has also announced significant investments in climate-related initiatives.
‘Mobilization of Capital’
With the Principles, Treasury said it is supporting the “mobilization of more private sector capital to address the physical and economic impacts of climate change and to seize on the historic economic opportunity presented by the green transition.”
As part of the release of the Principles, Treasury also announced funds from the private and non-profit sectors, including approximately $340 million from a number of philanthropic organizations to support the continued development of research, data availability, and technical resources intended to help financial institutions develop and execute robust, voluntary net-zero commitments.
‘Transition Planning Efforts’
“This funding will also support work to facilitate the transition planning efforts of non-financial sectors of the economy,” Treasury said, noting other organizations have also announced plans to generate tools and technical work needed to facilitate the execution of net-zero commitments.
“The climate crisis is propelling a massive economic shift and is hitting the most vulnerable countries and communities first and hardest,” Treasury said. “There’s increasing demand for technologies, products, and services that will reduce greenhouse gas emissions, support a clean energy future, and help adapt to a changing climate across all sectors. This demand is fueling growth in new industries and business models.
“In the United States, government support is playing a role in accelerating this transition,” Treasury continued. “But successfully building these new industries will in part require a private financial system that allocates increasing amounts of capital and expertise to the companies and people building this new clean energy economy. The Principles that Treasury is unveiling are intended to support this growth.”
Getting to Net Zero
Treasury added the Principles establish that financial institution net-zero commitments should be in line with limiting the increase in the global average temperature to 1.5 degrees Celsius.
“They affirm that financial institutions that have made these commitments should develop transition plans with clear practices, targets, and metrics. And that they should support their clients and portfolio companies in adopting their own transition plans,” Treasury said.
A link to the full Principles can be found here.
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