‘Robust’ net-zero framework for banks released

The Institutional Investors Group on Climate Change (IIGCC) has launched a net-zero framework for banks.

Released in partnership with the Transition Pathway Initiative (TPI), the standards will help investors engage with banks when fulfilling their own climate change commitments, said Stephanie Pfeifer, CEO of IIGCC.

“Due to the nature of their activities, banks have an outsized role to play in whether the global economy successfully decarbonises or not,” Pfeifer said in a statement.

The framework outlines 10 standards that investors expect from banks’ net zero transition plans: bank commitments, targets, exposure and emissions disclosure, historical emissions performance, decarbonisation strategy, climate solutions, lobbying, climate governance, just transition, and reporting and accounting disclosures.

The organisation states that banks should commit to being net zero by 2050, create short, medium, and long-term targets, disclose emissions and exposure to high-emitting sectors, and report annual progress on their emissions targets.

In addition, they should establish a decarbonisation strategy specific to each business activity, such as implementing policies that avoid financing things like coal-fired stations and oil and gas projects. Banks should also set out their approach to helping facilitate climate solutions, as well as conduct lobbying that is in line with limiting global warming.

The standards also state that banks should establish board oversight of their transition policies and identify the social impacts of their strategies and minimise the impact when possible.  And finally, the framework states that banks should comply with the Task Force on Climate-related Financial Disclosures and include TCFD reporting their annual report.

The standards are focused on banks’ financed or facilitated emissions instead of the emissions they make from their operations “as these are generally much larger and reflect greater business risks and opportunities”, the report states.

Over 25 investor institutions contributed to the standards, including Amundi, Legal & General Investment Management, Nest Corporation, Schroders and Fidelity.

The TPI Centre also launched a net-zero banking assessment framework based on the IIGCC’s framework which will be used to assess 26 global banks and their transition progress. The first assessment is expected in the summer. The assessments will capture the progress banks have made, as well as suggestions for improvement.

According to Clara Jouvel, deputy director at TPI, the framework will provide “a robust tool for assessing banks’ preparedness in transitioning to net zero, and how well their financing activities align with the goals of the 2015 Paris Agreement”.

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