Three of the world’s leading financial institutions today announced the formation of The Carbon Principles, climate change guidelines for advisors and lenders to power companies in the US.
These Principles are the result of a nine-month intensive effort to create an approach to evaluating and addressing carbon risks in the financing of electric power projects. The need for these Principles is driven by the risks faced by the power industry as utilities, independent producers, regulators, lenders and investors deal with the uncertainties around regional and national climate change policy.
The Principles were developed in partnership by Citi, JPMorgan Chase and Morgan Stanley, and in consultation with leading power companies American Electric Power, CMS Energy, DTE Energy, NRG Energy, PSEG, Sempra and Southern Company. Environmental Defense and the Natural Resources Defense Council, environmental non-governmental organisations, also advised on the creation of the Principles.
This effort is the first time a group of banks has come together and consulted with power companies and environmental groups to develop a process for understanding carbon risk around power sector investments needed to meet future economic growth and the needs of consumers for reliable and affordable energy.
The consortium has developed an Enhanced Diligence framework to help lenders better understand and evaluate the potential carbon risks associated with coal plant investments.