The Institutional Investors Group on Climate Change (IIGCC) and the Transition Pathway Initiative Global Climate Transition Centre (TPI Centre) have collaborated to develop a new Net Zero Standard for Banks.
The standard was developed following consultations with investors and a pilot study with 27 banks. It outlines investor expectations for achieving net zero emissions and intends to help the transition to a sustainable future.
Under the standard, banks will be able to assess their own long-term net zero commitments, interim targets, exposure to high-carbon sectors, and strategies for driving decarbonisation in these sectors. It also covers investments in climate solutions, engagement with green policymaking, climate-related governance, and requirements for clients to aid a just net zero transition.
Carla Jouavel, deputy director at TPI Global Climate Transition Centre, said: “Aligning investments with the aim of limiting global temperature rise to 1.5˚C above pre-industrial levels remains critical for the banking sector. This Framework will inform investor engagement with the banking sector, helping to progress the transition to a low-carbon economy.”
To determine how aligned banks are with the Paris Agreement, the TPI Centre has also introduced the Net Zero Banking Assessment Framework, consisting of several measurable indicators and scoring guidance. The TPI Centre will use this framework to assess 26 global banks annually across Europe, North America, and Asia. The assessment findings, which will be published later this summer, will look to identify areas for improvement while acknowledging the progress made by banks in implementing their climate-related policies and plans.
Stephanie Pfeifer, CEO of the IIGCC, said: “Due to the nature of their activities, banks have an outsized role to play in whether the global economy successfully decarbonises or not. For investors with net zero commitments, many of which will include investments in banks, it will therefore be vital to engage with banks over their transition plans in order to fulfil their own commitments.
“I am delighted that IIGCC has today published the Net Zero Standard for Banks alongside TPI Centre’s Net Zero Banking Assessment Framework. As a result, investors will be better placed to assess how prepared banks are for the transition and to shape their engagement strategies accordingly.”
The final Standard and Net Zero Banking Assessment Framework follows multiple rounds of investor consultation and a pilot study conducted in 2022. The pilot study found that while banks have stepped up in committing to net zero, disclosure on implementation of those commitments is less consistent.
The delivery of the standard follows the publication of the 14th annual Banking on Climate Chaos report, which revealed that, during the seven years since the Paris Agreement was adopted, the 60 largest banks have committed an estimated $5.5 trillion to fossil fuel projects.
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