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US Treasury Secretary Janet Yellen will announce a series of new financing “principles” on Tuesday aimed at incentivizing more private sector capital to invest in climate and clean energy projects and combat greenwashing, response to what she describes as the “significant economic costs” of global warming. .
In a speech to be delivered in New York during Climate Week on the sidelines of the UN General Assembly, Yellen will warn that record heatwaves and unprecedented wildfires threaten to impose a major brake to its economy.
The principles are, however, voluntary and only set out best practices for financial institutions with net zero commitments and promote “consistency and credibility”.
Yellen will say climate change presents an investment opportunity for U.S. businesses, citing research estimating more than $3 trillion in global investment opportunities associated with the transition to net zero each year by 2050 , including in the United States.
This is the minimum amount estimated to be needed to shift the global energy system from its reliance on fossil fuels to green energy to curb rising temperatures.
“Without considering these factors, financial institutions risk finding themselves left behind with stranded assets, outdated business models and missed opportunities to invest in the growing clean energy economy,” Yellen will say.
The principles include recommendations that financial institutions should use credible metrics, develop an implementation strategy, be transparent about their commitments and progress, and report on environmental justice and progress.
Treasury also recommends that net zero emissions commitments from financial institutions be consistent with limiting the increase in global average temperature to 1.5°C since pre-industrial times. The world has already warmed by at least 1.1°C and experienced its hottest season on record.
Alongside the US Treasury’s announcement, the coalition of financial institutions aiming to reduce emissions, known as the Glasgow Financial Alliance for Net Zero, will launch a consultation on financial institutions’ financial strategies.
The Gfanz paper, co-chaired by former Bank of England Governor Mark Carney, seeks to develop ways to measure emissions reductions achieved through technologies, accelerating the phase-out of major polluting assets such as coal-fired power plants, or by financing companies that have considered adapting their activity to the objective of limiting global warming to 1.5°C. However, the plan allows absolute emissions to continue to increase temporarily.
“These frameworks support financing for companies with high emissions and that have credible plans to reduce them,” Carney said. “It’s a viable strategy to see emissions in your portfolio increase while you finance a decline in emissions from the companies you invest in. »
The world’s 60 largest banks by asset size have invested $5.5 billion in the fossil fuel industry since the 2015 Paris agreement to limit global warming was signed by nearly 200 countries , according to data from campaign group RAN.
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