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U.S. Climate Finance Working Group Recommends "Pragmatic Approach" to Sustainable Low-Carbon Economy

A U.S. Climate Finance Working Group ("CFWG"), made up of 11 associations that include ISDA, SIFMA, FIA and the American Bankers Association, laid out 10 recommendations "essential" for a U.S. transition to a sustainable low-carbon economy. The principles include better corporate disclosure, with a goal "of converging" on an international standard, as well as U.S. international climate policy engagement.

The CFWG recommended: (i) alignment with the Paris Agreement, (ii) increasing international engagement, (iii) fostering innovation in "hard-to-abate" sectors like transportation and heavy industry, (iv) pricing carbon, (v) "building-out" sustainable U.S. infrastructure, (vi) harmonizing taxonomies, data standards and metrics, (vii) requiring "robust" climate disclosure, (viii) risk-based financial regulation, (ix) developing climate risk modelling and (x) strengthening risk finance instruments in the insurance sector.

Of these, ISDA Chief Executive Officer Scott O'Malia highlighted:

  • the harmonization of taxonomies, data standards and metrics, since such a standardization would enable investors to access the "growing class" of environmental, social and governance (or "ESG") products while managing exposure; and

  • risk-based climate-related financial regulation to "avoid creating perverse incentives."

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American Bankers Assoc., FIA, ICI, ISDA, SIFMA