THE INITIATIVE

“Mainstreaming” climate change considerations throughout financial institutions’ operations, and in their investing and lending activities, will enable financial institutions to deliver better, more sustainable, short-term and long-term results – both developmentally and financially. “Mainstreaming” by definition implies a shift from financing climate activities in incremental ways, to making climate change – both in terms of opportunities and risk – a core consideration and a “lens” through which institutions deploy capital.

Sharing this ambition, more than 20 institutions launched the Climate Action in Financial Institutions Initiative (formerly known as 5 voluntary Principles for Mainstreaming Climate Action within Financial institutions) on December 7, 2015 in the sidelines of COP21.

As of March2019, 44 institutions around the globe have joined the Initiative and endorsed the 5 voluntary Principles for Mainstreaming Climate Action. These voluntary Principles are:

  1. COMMIT to climate strategies
  2. MANAGE climate risks
  3. PROMOTE climate smart objectives
  4. IMPROVE climate performance
  5. ACCOUNT for your climate action

Overarching Aims and Objectives of the Initiative

The Climate Action in Financial Institutions Initiative helps financial institutions face the concrete challenges of the integration of climate considerations into their different activities and operations. The Initiative focuses on sharing expertise, knowledge and practices among Supporting Institutions – and with the broader business and financial community. The Initiative aims to provide an opportunity for financial institutions to:

Foster the implementation of the voluntary Principles for Mainstreaming Climate Action and learn from each other;
Ensure that lessons learned around good practice are disseminated;
Support the development of new approaches for mainstreaming climate change.

How do Supporting Institutions collaborate?

Specifically, the work of the initiative includes three activities:

  1. Knowledge Sharing within the Financial Community: The Initiative will be a platform for sharing knowledge on “how” financial institutions integrate climate considerations across operations. Knowledge sharing activities will happen along each of the 5 voluntary Principles.
  2. Dissemination of Emerging Practices and Lessons Learned: Recognizing that financial institutions may vary in “how” they integrate climate considerations, and recognizing that approaches and emerging practices may be replicable in other institutions, the voluntary Principles will collect and disseminate examples of emerging practices, inclusive of the lessons learned through the implementation of those approaches.
  3. Collaboration among Supporting Institutions on Areas of Common Interest: Recognizing that there may be many more examples of “emerging practice” under some voluntary Principles than others, Supporting Institutions expressed a desire to collaborate on the development of new/innovative approaches where few currently exist. Collaboration on new approaches, as well as the possibilities to harmonize existing climate mainstream approaches/tools will form part of the work of the Initiative.

For the 2017-2018 period, supporting institutions have decided to organize their efforts in the framework of four Work Streams:

What is the vision of the Initiative?

The Climate Action in Financial Institutions Initiative builds on the pivotal role financial institutions play in scaling up and directing financing toward investments and assets that are necessary for transitioning to low-carbon, resilient economies globally, and achieve ‘net zero’ carbon emissions in the long term. In line with the internationally agreed commitments to urgently address the threat of climate change, through 5 voluntary Principles the Initiative supports the global objectives of:

holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursue efforts to limit temperature increase to 1.5 °C,
increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience, and
making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

The Climate Action in Financial institutions Initiative intends through its 5 voluntary Principles to make climate change considerations a core component of how financial institutions conduct business, parallel to and in addition to the necessary development of appropriate regulatory and enabling environments at the domestic and international levels. They imply a shift from incremental financing of climate activities to ensuring that climate change – risk and opportunity – is a fundamental consideration through which financial institutions deploy capital.

The vision of the voluntary Principles for Mainstreaming Climate Action is that they provide a pathway for financial institutions to systematically integrate climate change considerations across their strategies, programs and operations, in order to deliver more sustainable short-term and long-term results – developmentally and financially.

Institutions adopting the voluntary Principles recognize that addressing climate change and mobilizing finance requires simultaneously (i) seeking out and scaling up low-carbon opportunities, and (ii) addressing risks posed by climate change along with environmental and social risks.

These institutions will deliver on the vision through their contribution to the knowledge sharing and collaboration in mainstreaming climate action.

What is the current governance structure ?

The current governance structure of the initiative comprises two bodies:

1)    The Supporting Institutions Assembly consists of all financial institutions whose management has publically confirmed its support for the Climate Action in Financial Institutions Initiative and acknowledged the guidance provided by the voluntary Principles for Mainstreaming Climate Action within Financial Institutions. Supporting Institutions have also confirmed their interest in participating (on a voluntary basis) in the ongoing knowledge sharing and development of emerging operational approaches and practices linked to the voluntary Principles. The Assembly takes responsibility for high-level decisions, while day-to-day decisions are delegated to the Coordination Group.

2) The Coordination Group is a permanent body (with rotating membership of Supporting Financial Institutions) and which is supported by a secretariat. In 2018, representatives of 7 supporting institutions were nominated to undertake this role in its first term, each of them represents a constituency of Supporting institutions.

  • EBRD and IADB representing Multilateral development banks
  • AFD and BOAD representing International/bilateral/regional/national development banks
  • HSBC representing Developed country commercial financial institutions
  • YES BANK and BMCE Bank of Africa representing Developing country commercial financial institutions

3 ) The Secretariat is an independent entity that supports the Coordination Group for the implementation of its various tasks. Among its responsibilities, the Secretariat provides in depth inputs to the different work streams and the construction of the annual work plan and assists the Coordination Group in the organisation of meetings and the internal and external outreach of the initiative.

Since late 2016, the Coordination Group has selected the Institute for Climate Economics (I4CE) to house the Secretariat. I4CE has been involved in the area of mainstreaming climate action within financial institutions and has produced a number of reports on topics related to the initiative’s work streams.

For more information on the governance of the initiative:  HOW TO JOIN

Adopt the 5 voluntary Principles