New guidance has encouraged members of the Net Zero Banking Alliance (NZBA) to support their clients’ efforts to reduce emissions. Updated recommendations for banks on climate target setting – issued by the United Nations Environment Programme Finance Initiative (UNEP FI) – introduced sections covering stakeholder engagement and the role of carbon credits for the first time. The guidance outlines key principles to underpin the setting of credible, robust, impactful and ambitious targets for achieving net zero greenhouse gas emissions goals in alignment with the Paris Agreement. The added section on stakeholder engagement emphasised the importance of banks supporting their clients in their efforts to reduce real economy emissions and calls on banks to assist policymakers in finding solutions to transition challenges. The other addition stated that carbon credits should not be used as a primary strategy to achieve emissions reductions but rather as a supplementary tool. Where they are used, carbon credits should always be additional and certified, and banks should conduct appropriate due diligence on client credit claims. First published in 2021, this is third version of the guidance, which will be reviewed at least every three years. The update also clarified that the ambition is to align with the Paris Agreement goals of limiting global warming to well below 2°C, striving for 1.5°C. It also expanded in scope to include specific sectors and activities. The NZBA recently voted in favour of changes to its framework following a series of high-profile exits, largely from US banks.
