US Treasury release net-zero principles for financial institutions

September 22nd, 2023

The US Treasury has published a set of voluntary principles for net-zero financing and investment, highlighting the best practices for financial institutions.

Its nine principles highlight the importance of financial institutions’ net-zero commitments, promote consistency in approaches and encourage adoption of best practices.

The guidance focuses on financial institutions’ Scope 3 financed and facilitated greenhouse gas (GHG) emissions.

The principles recommend an institution’s net-zero commitments should be aligned with the Paris Agreement goal to limit the increase of the global average temperature to 1.5°C.

They also encourage institutions to consider transition finance, managed phaseout, and climate solutions practices when deciding how to realize their commitments.

Following collaboration with financial market participants, research organisations, and civic groups, the Treasury found stakeholders required further clarity on where the industry has reached a consensus in terms of best practices and where gaps still remain.

The voluntary guidance has been published to address these needs.

The principles have been published alongside several announcements from non-governmental organisations, including a $340 million commitment from philanthropic organisations including Bezos Earth Fund, Bloomberg Philanthropies and Climate Arc.

The Glasgow Financial Alliance for Net Zero (GFANZ) announced that over 50 US financial institutions will publish net-zero transition plans over the next year using the voluntary common frameworks developed by GFANZ and financial sector alliances.

Janet Yellen, Treasury Secretary, said: “We know that moving forward the clean energy transition at the needed pace will not be easy. We are still working to overcome challenges related to technological advancements and new business models, among others.

“But the progress we’re making is important. The principles we are launching today will support implementation of net-zero commitments and shape accompanying technical work.”

The publication follows anti-ESG bills being introduced across several US states, including North Carolina and Florida.