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Key initiatives and trends in voluntary market-led standards and principles

Market-led initiatives have been active on climate-related issues for well over two decades. A range of initiatives, voluntary standards and principles are rapidly becoming de-facto standards and expected good practice across the financial community on diverse subjects from green bond issuance to GHG accounting.

Market-led initiatives – whether led by companies, non-for-profit organizations or financial institutions – continue to make important contributions to the different aspects of the integration of climate change. Over the past years, varying types of groups, coalitions or initiatives have joined efforts in the development of approaches, tools and methodologies that in some instances have been widely adopted and have rapidly become de-facto standards.

Some of the earlier market-led initiatives have focused on protocols and standards for greenhouse gas accounting. Some have become market standards – at times via the International Standard Organization (ISO) or other standard-setting bodies. One of the most recent examples in the GHG accounting area is the Partnership for Carbon Accounting Financials (PCAF) on the measurement and disclosure of GHG emissions for different asset classes.

A second area of focus has been on labelling activities or products as contributing to climate goals. For example, the MDBs-IDFC Common Principles for Climate Finance Tracking are a reference for determining if certain economic activities or technologies can be classified as supporting climate goals. The International Capital Markets Association Green Bond Principles have also played a key role in developing and detailing sectoral definitions and classifications for use in labelled financial products.

Market-led initiatives also play a role in laying out how climate change should be addressed strategically by financial institutions. UNEP FI for example released Principles for Responsible Investment and Principles for Responsible Banking that are widely adopted by both banks and investors. Similarly, the Equator Principles provide guidance on risk management and the CDP questionnaire on voluntary reporting.

In many instances the experience from the road testing and adoption of voluntary standards, principles and methodologies have influenced the direction of regulatory decisions on disclosure requirements, taxonomies and other requirements.


Key initiatives:

  • CDP: this organisation has developed a climate change questionnaire that may be used by financial and non-financial institutions for voluntary reporting on climate performance. CDP datasets may be used by financial institutions to collect information on companies. CDP reporting aims to be in line with the Task Force on Climate-related Financial Disclosures (TCFD)
  • Climate Bonds Initiative (CBI): CBI released a Climate Bonds Standard. The latest version of the standard was designed to ensure compatibility with the new EU Green Bond Standard (GBS), the latest version of the Green Bond Principles (GBP), Green Loan Principles and recent market developments including guidelines adopted by India, ASEAN and Japan.
  • Equator Principles: Based on the policies and guidelines of the World Bank and International Finance Corporation (IFC), this set of 10 Principles for financial institutions aims at “determining, assessing and managing environmental and social risk in projects”.
  • The Global Reporting Initiative (GRI): this organisation launched the GRI Standards to report on sustainability impacts.
  • International Capital Market Association (ICMA) – Green Bonds Principles: ICMA released Voluntary Process Guidelines for Issuing Green Bonds
  • Partnership for Carbon Accounting Financials (PCAF): This initiative developed a standard, which provides detailed methodological guidance to measure and disclose GHG emissions associated with six asset classes
  • Science Based Targets initiative, framework for financial institutions (SBTi FI): This framework guides financial institutions in setting science-based targets to align their lending and investment activities with the Paris Agreement.
  • Task-force on Climate-related Financial Disclosures (TCFD): This task-force was mandated by the G20’s Financial Stability Board to “develop voluntary, consistent climate-related financial risk disclosures”. These recommendations promote disclosures in four different areas: governance, strategy, risk management, and metrics and targets.
  • UNEP FI (Sustainable Banking Principles): UNEP FI supports global finance sector principles to catalyze integration of sustainability into financial market practice. The frameworks UNEP FI has established or co-created include the Principles for Responsible Banking (PRB), Principles for Sustainable Insurance (PSI), and the Principles for Responsible Investment (PRI).