Treasury Secretary Janet Yellen on Tuesday will outline voluntary standards aimed at promoting sustainable investment and discouraging the practice of misleadingly marketing business activities as environmentally friendly, known as greenwashing.
Yellen will make the comments in New York at the Bloomberg Transition Finance Action Forum in New York City, according to excerpts released by the Treasury Department. The voluntary principles will be accompanied by $340 million in voluntary philanthropic commitments, according to the Treasury Department.
The principles outlined by the Treasury Department state that institutions’ commitments should be in line with keeping warming below the international threshold of 1.5 degrees Celsius; and that those institutions should incorporate plans for managed carbon phaseouts in their plans and develop specific metrics and goals as well as specific governance and oversight practices.
“There is extensive evidence showing that the changing climate has significant financial impacts. Without considering these factors, financial institutions risk being left behind with stranded assets, outdated business models, and missed opportunities to invest in the growing clean energy economy,” Yellen said in excerpts released by the department.
“We are proud to launch the Net-Zero Principles in response. Our goal is to affirm the importance of credible net-zero commitments and to encourage financial institutions that make them to take consistent approaches to implementation. Our work will also help institutions that have not yet made commitments see what doing so might entail.”
The department emphasized the voluntary nature of the principles, which come after a period of sharp backlash to the use of environmental and sustainable governance in the finance sector, often accompanied by misleading characterizations of who will be compelled to follow them.
The Treasury Department under Yellen, meanwhile, has been criticized by environmentalists for its pace on climate issues, with Joe Thwaites, an international climate finance expert at the Natural Resources Defense Council, telling Bloomberg in 2021 that “the Treasury really hasn’t pulled out all the stops.”