On February 17, 2021, a working group of 11 U.S. financial services trade associations released their principles for “Financing a U.S. Transition to a Sustainable Low-Carbon Economy” (Principles).

The working group notes that climate change presents both risks and opportunities for the financial services industry and that, as a result, the industry must build reliable, consistent data sets, metrics, methodologies and standards to ensure that climate-related risks are appropriately understood, managed and disclosed.

We highlight the Principles, the members of the working group and key aspects of the related working group release in this Blog Post.

The Principles are:

  • Set science-based climate policy goals that align with the Paris Agreement;
  • Increase and strengthen U.S. international engagement;
  • Provide clear long-term policy signals that foster innovation in financial services;
  • Price carbon and leverage the power of markets;
  • Minimize costs and support jobs in the transition;
  • Foster international harmonization of taxonomies, data standards and metrics;
  • Promote more robust climate disclosure and international standards;
  • Ensure climate-related financial regulation is risk-based;
  • Build capacity on climate risk modeling and scenario analysis; and
  • Strengthen post-disaster recovery, risk mitigation and adaptation.

The working group release also notes that transitioning to a lower-carbon economy will require the development of alternative fuels and new technologies, calling for trillions of dollars of investment in innovation and resilient infrastructure.

In the release, the working group calls for better climate disclosure and convergence toward an international disclosure standard (such as those developed by the Task Force on Climate-Related Financial Disclosures), a continued focus on a well-functioning U.S. financial system and U.S. engagement in international climate policy discussions.

The working group included the American Bankers Association, CRE Finance Council, Financial Services Forum, Bank Policy Institute, International Capital Market Association, Institute of International Bankers, Financial Industry Association, Institute of International Finance, International Swaps and Derivatives Association, Investment Company Institute and the Securities Industry and Financial Markets Association. The release also noted that several other trade associations, including the American Property Casualty Insurance Association, and individual financial institutions had provided feedback on the Principles.