The document comprises of seven separate modules which provide guidance on specific topics such as governance and organisational development, stopping flows of finance to fossil fuels and deforestation, and financing innovation and influence. The report covers the major environmental, social, and governance (ESG) issues facing the finance industry today and provides recommendations for banks and lending institutions in responding to these challenges.

Governance and organisational development

The report notes that financial institutions’ governance and organisational structure are crucial to ensure a successful transition towards a climate-safe world. The report calls for organisational structures that support and provide accountability for transition. The report also recommends embedding climate change into the culture and strategy of the financial institution.

Stopping flows of finance to fossil fuels and deforestation

According to the report, stopping flows of finance to fossil fuels and deforestation is critical in the transition towards climate safety. Financial institutions should examine their portfolios, assess alignment with the Paris Climate Agreement, and implement ambitious deforestation and fossil fuel reduction targets.

Decarbonising balance sheets and economies

The report recommends adopting sector-wide decarbonisation targets between 2030 and 2050 to achieve a net-zero goal. The report advises using credible scenarios aligned with the United Nations Environment Programme Finance Initiative’s (UNEPFI) Guidelines for Climate Target Setting for Banks. Banks and lending institutions should also apply the Precautionary Principle by acting as soon as possible to promote decarbonisation.

Financing innovation and influence

The report encourages finance industry leaders to use financing innovation and influence as tools in the transition towards climate safety. Financial institutions should provide sectoral products and technical assistance, integrate broader social and environmental factors, and consider adaptation, resilience and the needs of vulnerable communities in their financing strategy.

Measurement, disclosure and reporting

The report provides a summary of the key components of measurement and disclosure necessary for developing a good transition plan. The report suggests including the full extent of the financial institution’s business and measuring the real economy impact as assets decarbonise. Best available data should be used and continuously improved data quality. The report recommends using clear accounting principles if using ‘negative emissions’ and applying the UNEP FI Portfolio Impact Analysis Tool for Banks.

Target setting

The report notes that financial institutions should set themselves targets for reducing their financed carbon emissions. The report advises banks to select credible scenarios aligned with the UNEPFI Guidelines for Climate Target Setting for Banks. Banks should also set early interim, and sector-based targets and apply the Precautionary Principle by acting as soon as possible.

Broader influence

The report suggests that fostering broader influence is crucial in the transition towards climate safety. The report encourages finance industry leaders to work together to produce new and innovative content around the features, strategies, and tools banks to implement good transition plans.