Every actor in the global economy has a role to play in this transition. In practice, achieving net-zero emissions in the real economy will require scaling up low-carbon solutions while transitioning high-carbon assets and companies across global sectors. This includes carbon-intensive sectors where abatement remains especially difficult.
As global climate ambition increases and net-zero commitments proliferate, climate alignment is establishing a new paradigm for the financial sector with redefined expectations around the role for financial institutions in advancing the net-zero transition.
Financial institutions are increasingly expected to play a critical and proactive role in the net-zero transition. This means not only scaling up green investments or restricting the financing of high-emitting activities, but also actively supporting the transition of carbon-intensive industries to net zero.
For private financial institutions, climate alignment means actively using their levers of influence to move the real economy toward net zero. Levers of influence include:
Lending and investment decisions
Capital markets activities
Non-revenue-generating efforts (e.g., stewardship and advocacy)
Climate alignment requires private financial institutions to respond to increasing pressure from their shareholders, clients, and customers to act on climate. But it also introduces an opportunity for financial institutions to create and capture value from an expanding pool of low-carbon investment opportunities through new alignment-linked products and services.
By reorienting their strategies to reduce their carbon footprints and supporting their clients’ transitions toward net-zero emissions, financial institutions can:
Minimize transition and reputation risk
Actively support progress toward global climate goals in the real economy
Create a competitive edge