CPI launches Framework for Sustainable Finance Integrity

Framework aims to establish universal commitment benchmarks for financial institutions

The Climate Policy Initiative (CPI) has launched a ‘Framework for Sustainable Finance Integrity’, which aims to provide universal expectations for climate commitments by financial institutions.

The framework suggests a series of ‘minimum’ and ‘leadership’ benchmarks which represent “meaningful sustainable finance commitments”. The benchmarks are divided into three categories: targets and objectives, implementation (concrete actions that can be taken), and metrics and transparency, and are intended to be applicable across all sectors of the finance industry.

The ‘minimum’ benchmarks include eliminating finance for new coal projects, committing to Paris-alignment and disclosing Scope 1 and 2 of portfolio emissions, as well as climate and social risks.

Leadership benchmarks, based on recommended actions by NGOs or the most ambitious announced targets, include reporting in line with the Taskforce on Climate-related Financial Disclosures and its upcoming biodiversity-equivalent, the Taskforce on Nature-related Financial Disclosures. It also includes setting “context-specific complementary” targets in areas such as biodiversity and the just transition.

For each benchmark and topic, the framework gives specific sector-based advice, including for governments, development banks and asset owners and managers.

A high-level advisory council with members from all sectors of the financial industry was responsible for reviewing and guiding development of the framework. Members included former World Bank CFO Joaquim Levy, and HSBC’s outgoing Global Head of Sustainable Finance Daniel Klier, as well as representatives from Filipino, German and British government ministries. Rachel Kyte, Dean of the Fletcher School, and Laurence Tubiana, CEO of the European Climate Foundation, which supported the CPI in creating the framework, co-chaired the council.

The CPI had originally intended to launch the framework as a set of ‘principles’, but renamed it after discovering that the principles designation “generated confusion on the contents and purpose of our documents”, said Global Managing Director Barbara Buchner at a launch event.

“Given the flurry of announcements in recent weeks, we have recognised that the world does not need another sign-on initiative,” she added.

While the framework welcomes the establishment of sustainable finance coalitions including the Network for Greening the Financial System central bank group and the Net Zero Asset Owners Alliance, it says that too little attention is paid to other issues such as biodiversity and the Just Transition. It also says that the siloed approaches of coalitions  create situations which require engagement from multiple sets of financial actors, such as the need for debt relief in developing countries, more difficult to overcome.

Hu Min, Executive Vice President of the Beijing Institute of Finance and Sustainability, who sat on the advisory council, said: “While there have been many attempts at creating principles, standards or taxonomies for sustainable finance, what is missing is a framework to bring these all together into an overarching vision. Far from ‘yet another empty announcement', this new framework sets the bar for leadership.”

The framework launched alongside three investment blueprints for sustainable financial instruments in the post-Covid recovery. The blueprints propose ‘debt for climate’ swaps, especially for middle-income countries; sovereign green recovery and results-based financing.

The CPI is inviting feedback on its proposals, and hopes to have a final version in place for COP26 in November.