INSIGHT by the IIGCC
〉New Standard and Banking Assessment Framework will support investor engagement with banks over the transition to net zero.
〉26 banks to be assessed annually against the TPI Centre’s Banking Assessment Framework, with the first assessments to be published in summer 2023.
〉Through its Net Zero Banks Working Group, IIGCC will support investor engagement with a focus list of 20 banks in Europe, Canada and Asia.
The Institutional Investors Group on Climate Change (IIGCC), in consultation with the Transition Pathway Initiative Global Climate Transition Centre (TPI Centre), has launched a Net Zero Standard for Banks setting out investor expectations on the transition to net zero.
The Standard is built around the 10 areas: bank commitments; targets; exposure and emissions disclosure; emissions performance; decarbonisation strategy; climate solutions; policy engagement (lobbying); climate governance; just transition; and annual reporting and accounting disclosures; and complements the Net Zero Investment Framework (NZIF).
The Standard is intended to support constructive engagement with banks to aid ongoing implementation of climate commitments. Where necessary, it will continue to evolve and be refined to reflect relevant developments, including new methodologies, policy and regulation.
Alongside the Standard, the TPI Centre has launched a Net Zero Banking Assessment Framework, which is a set of measurable indicators, sub-indicators, and scoring guidance for assessing the alignment of banks against the goals of the Paris Agreement. The Framework was produced by the TPI Centre in consultation with IIGCC and Ceres.
The TPI Centre will use the Net Zero Banking Assessment Framework to assess 26 global banks across Europe, North America and Asia annually, with the inaugural assessments due for publication in summer 2023. As well as highlighting areas for improvement, the assessments will capture the progress many banks have made to date and the ongoing implementation of their stated climate-related policies and plans.
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. It is the same banks for which the TPI Centre will publish the inaugural assessments later this year.1
| IIGCC’s Net Zero Banks Working Group
As publicly available resources, the Standard and Net Zero Banking Assessment Framework may be used by all investors to support engagement with banks on the transition to net zero. Through its Net Zero Banks Working Group, IIGCC will support investor engagement with a focus list of 20 banks in Europe, Canada and Asia.
IIGCC’s Net Zero Banks Working Group includes more than 25 investors. Investor input into the Standard was supported by Natasha Landell-Mills (Sarasin & Partners LLP) and the Stewardship Team at EOS at Federated Hermes Limited (UK), including Bruce Duguid and Howard Risby.
“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.”
-Stephanie Pfeifer, CEO, IIGCC
“Aligning investments with the aim of limiting global temperature rise to 1.5˚C above pre-industrial levels remains critical for the banking sector. The TPI Centre’s Net Zero Banking Assessment Framework provides 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. This Framework will inform investor engagement with the banking sector, helping to progress the transition to a low-carbon economy.”
“We are pleased to be publishing the Net Zero Banking Assessment Framework alongside IIGCC’s Net Zero Standard for Banks.”
-Carla Jouavel, Deputy Director at TPI Global Climate Transition Centre
| Investor contribution to the Standard
Over 25 investors, including Amundi, Legal & General Investment Management, Nest Corporation, Schroders and Fidelity International have contributed to the development of the Standard.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
