Areas of Focus

  • Alignment Insights
  • State of the Market

Decarbonizing Sectors

The Center works with financial institutions to help decarbonize high-emitting sectors in the real economy by addressing common barriers to sectoral decarbonization, such as:

  • Conflicting sectoral decarbonization pathways
  • Insufficient data
  • Confusing climate performance methodologies
  • First-mover disadvantage
  • Inadequate supply of investable low-carbon assets

Working directly with financial institutions and their clients, suppliers, and regulators, the Center helps to create climate-aligned finance agreements that establish common sectoral decarbonization roadmaps and assessment methodologies.

As a Supporting Partner of the Mission Possible Partnership (MPP), the Center is leading finance work within net-zero sector platforms for:

Steel

Aluminum

Aviation

Cement

Chemicals

Trucking

Aluminum Climate-Aligned Finance Working Group

Aluminum production is responsible for roughly 2% of global greenhouse emissions per year, much of which are released from burning fossil fuels to generate electricity for the production process. If the aluminum sector were a country, it would be the sixth-largest consumer of electricity in the world. And demand for aluminum is set to grow 80% by 2050, making the sector’s transition to net-zero emissions a critical prerequisite to meeting climate goals.

Over half of the electricity used to produce aluminum is generated by burning coal, and nearly all the electricity is used to produce primary aluminum (with no recycled content). Decarbonizing aluminum will hinge on switching from coal to clean sources of power, increasing rates of recycling, improving material efficiency, and deploying breakthrough technologies. The new renewables and technologies needed to transition aluminum away from fossil-based energy by 2050 represent a once-in-a-generation financing opportunity for global banks.

Therefore, the Center for Climate-Aligned Finance is convening top lenders to the aluminum sector — Citi, ING, and Société Générale — to form the Aluminum Climate-Aligned Finance Working Group.

See Press Release

The Working Group will create a collective climate-aligned finance framework that defines how lenders can support the decarbonization of the aluminum sector and measure progress toward that goal. Any institutions interested in remaining up to date with the process and providing feedback during development are encouraged to join the Review Group.

Join Aluminum Review Group

Aviation Climate-Aligned Finance Working Group

Aviation accounts for 2.5% of global carbon emissions, and air traffic is projected to increase. In a business-as-usual scenario, aviation alone would use up 10% of the planet’s remaining carbon budget by 2050.

The aviation sector must accelerate the transition to sustainable aviation fuels, invest in more efficient aircraft, and support the development of new aviation technology. The financial sector will play a crucial role in funding the technologies, projects, and companies involved in this transition. Therefore, the Center for Climate-Aligned Finance is convening six top lenders to the aviation sector — Bank of America, BNP Paribas, Citi, Crédit Agricole, Societe Generale, and Standard Chartered — in the Aviation Climate-Aligned Finance Working Group.

See Press Release

The group will create a collective climate-aligned finance (CAF) framework that defines common standards of action for aviation decarbonization. The CAF framework is a commitment by banks to annually disclose the degree to which the greenhouse gas emissions from aircraft, airlines, and lessors they finance align with 1.5°C climate targets. The Working Group aims to craft an industry-backed CAF agreement before the end of 2022.

Banks that are interested in remaining up to date with the process and providing feedback during development are encouraged to join the Review Group.

Join Aviation Review Group

RMI’s Center for Climate-Aligned Finance will facilitate engagement between the Working Group and leading partner organizations focused on aviation and sustainable finance. Partner organizations include the Glasgow Financial Alliance for Net Zero, the Clean Skies for Tomorrow coalition, and the UN-convened Net-Zero Banking Alliance.

ING logo Societe Generale logo Allen Overy logo

Adopt the Sustainable STEEL Principles

steel princeiples logo

The Sustainable STEEL Principles provide a sector-specific measurement and disclosure framework for banks, enabling them to support the decarbonization of the steel sector and assess their own climate progress in line with Net-Zero Banking Alliance (NZBA) guidance.

Founding signatories are invited to demonstrate leadership on the net-zero transition by signing up to this agreement, which will be officially unveiled at NYC Climate Week in September 2022.

Similar to the Poseidon Principles for shipping, Sustainable STEEL Principles signatories receive:

  1. An industry-supported methodology that is material-specific and establishes a fixed system boundary of emissions.
  2. An Alignment Zone, comprising two net-zero scenarios to inform target-setting and client engagement.
  3. Standardized instructions for steelmaker reporting with a 3rd third-party data provider available as an alternative.
  4. NZBA-compatible guidance to ensure that comparable bank-level disclosure occurs annually.
  5. A robust governance arrangement to support implementation and the ability to amend the framework.
Download the Framework

Leading lenders to the global steel industry — ING, Citi, Societe Generale, Standard Chartered, and UniCredit — developed this climate-aligned finance agreement over one year of consultations. Over 80+ stakeholders reviewed and informed the agreement components, including representatives from the financial sector, industry leaders, and decarbonization experts.

To become a signatory or to learn more about the process, please contact Lucy Kessler at [email protected].

Click below for additional materials:

Briefing on the Alignment Zone
Briefing on the Fixed System Boundary
Briefing on Differentiating between Primary and Secondary Steel Production

Worlds First Climate Alignment Agreement for Financial Institutions

The Poseidon Principles, launched in June 2019, are a framework for responsible maritime shipping finance and have established a model for how the financial sector can kick-start sectoral decarbonization.

They provide a way of quantitatively assessing whether financial institutions' ship finance portfolios are in line with the climate targets agreed by the International Maritime Organization (IMO), the United Nation's body that oversees international shipping.

Under the Poseidon Principles, signatories commit to assess and disclose the climate alignment of their shipping portfolios and work to bring their portfolios in line with climate targets. Signatories use the Principles to engage their clients when emissions hotspots are identified.

Only one year after launch, European signatories to the Principles structured over $1.2 billion in Poseidon-linked facilities. These loans tie the cost of capital to climate-aligned GHG performance.

Learn more at the Poseidon Principles website, and read about the first year of reporting here.

Real Estate Climate-Aligned Finance Team

The real estate sector is responsible for 40 percent of global greenhouse gas emissions. Three quarters is driven by building operations and associated electricity use, while the remainder comes from building materials used in construction such as steel and cement. In the United States, 110 million buildings represent 10% of GDP, and their operations contribute 13% to annual national greenhouse gas emissions.

RMI’s Center for Climate-Aligned Finance, in collaboration with RMI’s Carbon-Free Buildings team, seeks to accelerate the adoption of low-carbon technologies in the real estate sector. We aim to do this through expediting the deployment of transition capital and addressing pain points for effective real estate target-setting for financial institutions.

To design interventions that will achieve these goals, RMI is conducting a systems-level scoping and analysis of the real estate sector in the United States, including a detailed segmentation analysis. This analysis includes:

  1. Where carbon is concentrated,
  2. How capital flows into each real estate segment,
  3. What decarbonization pathways exist and how they differ by region, and
  4. How to address other barriers to decarbonization.

See blogs.

For regular updates about our real estate work, follow us on LinkedIn.

Alignment Insights

The Center's Alignment Insights Lab convenes leading financial institutions, climate experts, service providers, and representatives of alignment platforms to help implement the many promising climate-alignment commitments made to date by:

  1. Continually clarifying what climate alignment looks like in practice for different types of financial institutions
  2. Identifying and sharing best practices to support financial institutions as they integrate climate alignment across operations and business units
  3. Identifying and addressing barriers to climate alignment
  4. Coordinating with existing alignment platforms to support and consolidate efforts where appropriate

Following convenings, the Center publishes key findings in best practice reports for finance practitioners. These reports are designed to accelerate the exchange of alignment solutions in the financial sector. Publications also identify and recommend solutions for key stakeholders, including:

Financial Institutions

Regulators

Service Providers

Alignment Platforms and Initiatives

State of the Market

Assessing How the Financial Sector is Making and Implementing Climate Alignment Commitments

The Center measures how many of the world’s largest financial institutions (LFIs) have committed to using their levers of influence to move the global economy toward net-zero emissions. This is important for:

  1. highlighting momentum in the market,
  2. identifying where gaps are emerging, and
  3. understanding the direction of travel toward climate alignment.

Our July 2021 analysis covered the 119 firms with $500 billion or more in total assets, surveying banks, asset managers, asset owners, and insurers. We found:

Net-Zero Commitments are Mainstream but not Universal

Almost 40 percent of LFIs have made 2050 net-zero (or equivalent) commitments.

Lack of Common Language Makes It Difficult to Track and Assess Commitments

Commitments’ scope and transparency vary significantly. For example, some cover the entire business, while others focus on specific portfolios or business units.

Interim Targets are Helpful but Should Be Followed by Action

Robust target-setting should be followed up with actions that drive the real economy toward a 1.5°C future.

Download the full Coming into Alignment report for more insights.

Percentage of LFIs with net-zero commitments vs. total assets controlled by all LFIs

For further information on this analysis and our ongoing work, please contact Lizzy Harnett: [email protected]

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