The next decade will be crucial to meeting the goals of the Paris Agreement, aimed at limiting global temperature increase to 1.5°C above pre-industrial levels. Finance is being made a key priority for COP 26 this year. In the words of Mark Carney, the UN special envoy for climate action and finance, the objective for Glasgow is to “ensure that every financial decision takes climate change into account". In this ‘transition decade’, both investors and companies will be making key decisions, and accordingly, investors need standards and frameworks to assess the alignment of assets with a 1.5C pathway, including banks.
At the bottom of this letter is a clear set of investor expectations for how banks should demonstrate alignment with the goals of the Paris Agreement (“Aligning the Banking Sector with the Goals of the Paris Agreement”). Many of the signatories to this letter have already engaged with you on similar expectations as set out here.
The expectations cover three key areas:
- Action banks should take to align their financing activities with the Paris goals;
- Steps to strengthen governance to ensure delivery of net zero commitments; and
- Disclosure to demonstrate implementation.
By providing a holistic set of investor expectations supported by $10 trillion in assets under management or advice, this document provides an important reference point for banks as they develop their own methodologies and standards for Paris-alignment. In the coming year, we will be undertaking a process to develop an assessment framework for the sector, in partnership with the Transition Pathways Initiative (TPI). The aim of the IIGCC is to form a consistent message and voice to facilitate company and investor dialogue through the creation of this assessment framework. We welcome input into these discussions. Additionally, we will launch an engagement programme covering a number of the world’s largest banks.
Aligning the Banking Sector with the Goals of the Paris Agreement