The Role of Financial Institution in the Transition to Net Zero

Sustainability is no longer optional for organizations – it is an economic imperative. Financial institutions are committing to funding carbon reduction projects and initiatives to decarbonize their portfolios, demonstrating a clear link between carbon performance and the provision of capital and aligning this strategic decarbonization focus with similar interest from regulators, employees and society.

In an article for Metrus Energy, Chris Snyder, director at Guidehouse, discusses how large businesses and financial institutions embracing net zero transition affects the economy. Moving towards net zero will require a lot of private capital to fund upgrades. Financial institutions aim to support their borrowers’ and investees’ initiatives to reduce emissions, decarbonize their processes, and develop lower carbon business.

“The capital required to affect a net zero world is substantial and is a massive investment opportunity,” explained Snyder. “To this end, many financial institutions have announced sustainable finance lending and investment targets in the tens of billions of dollars level within the next decade or earlier.” 

The article discussed initiatives like the Partnership for Carbon Accounting Financials (PCAF), which has more than 230 financial institution signatories, that help financial institutions measure and disclose greenhouse gas emissions. Guidehouse, which serves as PCAF’s secretariat, has worked closely with global financial institutions to develop and facilitate the adoption of the first-of-its-kind Global GHG Accounting and Reporting Standard for the Financial Industry.

“With data, financial institutions can start to set baselines and develop reduction targets and pathways towards net zero,” added Snyder.