The International Organization for Standardization (ISO) announced the launch of “ISO 32212, Sustainable finance — Net zero transition planning for financial institutions,” a new standard aimed at enabling banks, insurers, and investors to develop, maintain and integrate climate transition plans into their activities.

According to ISO, the new standard is designed to provide a common framework for transition planning across the financial sector, applying to financial activities ranging from lending and insurance, to asset owner and asset manager investing and capital market activities.

In the document, ISO said:

“With connections to actors in all sectors of the real economy, financial institutions have an important role to play in advancing the goals of the Paris Agreement. By engaging in transition planning, developing and maintaining transition planning objectives and targets, and establishing robust policies and processes to integrate these into their financial activities, financial institutions can play a critical enabling role in supporting their clients and investees to manage risk and capture opportunities associated with the global transition to a net zero and climate-resilient economy.”

The new document sets out requirements and recommendations for strategic net zero transition planning by financial institutions, to support their response and contribution to the transition to a global net zero, including mobilizing and reallocating capital to enable decarbonization and climate adaptation activities in the real economy, as well as helping institutions in capturing opportunities and minimizing risks.

ISO said:

“Informed by forward-looking assessment of climate-related risks and opportunities, a financial institution can integrate transition planning objectives and targets into its strategy. It can set policies for its lending, investment or insurance activities, as well as its engagement activities with clients and investees, informed by analysis of their climate mitigation and climate adaptation strategies.”

Key topics covered under the new standard include identifying and assessing institutions’ current positions, including climate-related impacts, dependencies, risks and opportunities, developing and maintaining transition planning objectives and targets into financing decisions and engagement activities, communicating transition planning outcomes, reviewing performance and updating plans, and governance.

Daan van der Wekken, Head of Sustainability at ISO’s UK member body, BSI, said:

“The transition across the real economy depends on financial institutions being able to assess credible transition strategies and direct capital towards them. And that’s why global frameworks for transition planning are becoming increasingly important.”

Click here to access the new standard.