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Statement from GFANZ Co-Chairs and Vice Chair on the U.S. Treasury’s Net Zero Financing & Investment Principles

The Glasgow Financial Alliance for Net Zero (GFANZ) is a global coalition of financial sector alliances working together to support the world’s transition to net-zero emissions by 2050. Through the net-zero alliances, GFANZ unites over 650 institutions across the financial sector, including banks, insurers, asset owners, asset managers, financial service providers, and investment consultants, spanning 50 countries and representing 40% of global private financial assets. To help unlock transition investment in emerging markets and developing economies, GFANZ regional networks work to support capacity building and adoption of transition planning, capital mobilization, and reflect and address the diverse needs of financial systems around the world.

We welcome the release of the U.S. Treasury’s Principles for Net Zero Financing & Investment and salute Secretary Yellen’s outstanding leadership on climate. These Principles reinforce both the strategic imperative for financial institutions to independently align their financing with transition to net zero and the importance of credible, comprehensive, and comparable transition plans, in line with the best practice framework developed by GFANZ in 2022.

Recognizing the risks of climate change and the multi-trillion dollar opportunities of the transition to a net-zero economy, more than 650 financial institutions–including more than 100 U.S. firms–have already made voluntary net-zero commitments through the net-zero alliances supported by GFANZ. U.S. Treasury’s Principles recognize the importance and value of these independent commitments and the essential role of the financial sector in enabling the decarbonization of our economies through the finance they provide to households and companies.

To realize commitments, all institutions need a plan. Last year, GFANZ developed a common voluntary framework for net-zero transition plans, building on existing market best practice and extensive stakeholder feedback. This framework has emerged as a leading best practice globally, with firms now voluntarily disclosing transition plans and both public and private standard setters increasingly referencing it. As part of this framework, GFANZ developed a common definition of transition finance, which identifies four key financing strategies that support economy-wide decarbonization. Today, GFANZ launched a public consultation on work to further refine the definitions of these strategies, and to develop metrics to better capture the decarbonization benefits they are expected to deliver.

It is highly welcome that the U.S. Treasury Principles align with, and build upon, the GFANZ Net Zero Transition Plan Framework, and that U.S. financial institutions are encouraged to make use of leading common frameworks when developing their own independent transition plans. In addition to identifying the same overarching components of a credible net-zero transition plan, the Principles recognize the same four key financing strategies for supporting global decarbonization.

These strategies help ensure that finance will be available not only for climate solutions, such as clean energy, that are already fully aligned with the net-zero transition, but also to ‘go where the emissions are’ to finance companies with credible transition plans to reduce their emissions. The principles also support the responsible managed phaseout of assets that cannot be aligned with the net zero transition. This comprehensive approach will support jobs and growth while maximizing emissions reductions across all sectors of our economies.

This consistent approach to transition finance and transition planning is crucial to reducing market fragmentation to support the many U.S. institutions seeking to seize opportunities and mitigate risks in the transition. U.S. financial institutions are leading the way on developing and publishing transition plans, and we are hopeful that these Principles will meaningfully reinforce and accelerate efforts to finance the economy-wide transition to net zero.