Daily Newsletter

22 September 2023

Daily Newsletter

22 September 2023

UN General Assembly: US Treasury sets out new “principles” to boost green investment

The principles focus on companies’ scope 3 emissions and state that all net-zero targets should align with the global warming target of 1.5°C.

Annabel Cossins-Smith September 21 2023

US Treasury Secretary Janet Yellen has announced a series of nine new financing “principles” to boost investment in green technologies and projects in the country.

The voluntary, non-binding principles aim to highlight best practices for private sector financial institutions that have made net-zero pledges, and suggest ways companies and organisations can stay consistent and credible when implementing climate targets.

They include recommendations that financial institutions use credible metrics when calculating net-zero strategies, be transparent about progress and ongoing commitments to the energy transition, and account for social and environmental justice within the energy transition.

The principles focus on companies’ scope 3 emissions and state that all net-zero targets should align with the global warming target of 1.5°C set out in the Paris Agreement. They also suggest that practice should always align with commitments made to the green transition and “robust” governance processes should be implemented to oversee the effective implementation of targets.

In a speech delivered on Tuesday to the New York Climate Week summit, which runs alongside the UN General Assembly, Yellen warned that the extreme weather events seen this year, such as global record heatwaves, widespread wildfires and floods, will pose a threat to the US economy.

She added that climate change could present investment opportunities for US companies, citing research that estimates there is more than $3tn worth of potential global investment opportunity related to the energy transition between now and 2050. This is the minimum amount of investment predicted to be required for the global shift away from fossil fuels.

“Without considering these factors, financial institutions risk being left behind with stranded assets, outdated business models and missed opportunities to invest in the growing clean energy economy,” Yellen said.

Alongside the Treasury’s publication of its net-zero principles, the Glasgow Financial Alliance for Net Zero (GFANZ), a coalition of financial institutions aimed at reducing emissions, announced that it would launch a consultation on financial strategy for institutions. According to the Treasury, more than 50 US financial institutions, and more globally, will independently publish net-zero transition plans over the next year using the voluntary common frameworks that GFANZ and financial sector alliances have developed.

In addition, the GFANZ secretariat launched a 45-day consultation on its work to refine the definitions of its transition finance strategies and support financial institutions in forecasting the impact of these strategies on reducing emissions, with a final report to be released at COP28.

AI - a critical tool to achieve net-zero emissions target

Implementing AI in the energy sector will benefit resource management, failure prevention, and predictive analytics for renewables. The power industry is investing heavily in AI and ML to deliver the necessary solutions, such as sensor-connected power plants and smart grids to balance electricity supply and demand. Recent advancements in generative AI hold promise for elevating the existing AI framework within the energy sector.

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