Dec. 9, 2008 - Nearly a year after leading financial firms created the Carbon Principles for assessing the risks of backing dirty power projects, there's a new framework in town: A group of major industry players has launched a new code of best practices (this time, the "Climate Principles") to handle the risks and opportunities of climate change.

Adopted by industry heavyweights Crédit Agricole, HSBC, Munich Re, Standard Chartered and Swiss Re, the Climate Principles aim not only to guide emissions reduction commitments but also to "provide strategic direction across the full range of financial products and services," according to The Climate Group, a nonprofit organization that worked with the financial industry in developing the guidelines.

“The current global turmoil has reinforced the fact that global problems require global solutions," says Steve Howard, CEO of The Climate Group. "Early recognition of the risks and opportunities of climate change is essential to this sector’s future success.”

The Principles are intended to unify the finance sector's approach to addressing climate change, aligning with and building on existing initiatives. Guidance and goals are categorized by industry function:

• Retail banks will address customer interest in tackling climate change and barriers currently preventing them from taking action.
• Insurance and reinsurance institutions will advise clients on climate risks and mitigation technologies.
• Corporate and investment banks will work on financing solutions to facilitate investment in low-carbon technologies and emissions-reduction projects as well as measuring the climate impacts of their investments. They will also build expertise to support development of trading in emissions, weather derivatives, renewable energy credits and other climate related commodities.

The signatories say that, by offering a standardized way for financial institutions address and advise on climate change, the Principles will help boost transparency industrywide. (The framework also enables financiers to request that clients disclose the climate impact of their activities and seek emissions reduction and offset solutions.)

The Climate Principles will be managed by a steering committee, chaired by a representative member. The Climate Group will provide administrative support and keep tabs on how faithfully financial firms follow the Principles, identifying best practices across the sector.