FAQ Questions and answers about the Green Finance Alliance
What makes the Green Finance Alliance so unique?
In the following section, you will learn how this initiative of the Ministry for Climate Action helps banks, insurance companies, pension funds, corporate provision funds, and investment fund management companies make an important contribution to climate protection.
The Green Finance Alliance is an initiative of the Ministry for Climate Action (BMK) within the framework of the Green Finance Agenda. Its goal is to establish a broad alliance for climate protection in the Austrian financial industry. Target attainment will be monitored once a year based on the list of criteria, which will serve as the basis for this evaluation. An aggregated report will be disclosed annually to communicate the members’ overall progress.
The first members of the Green Finance Alliance are nine ambitious companies from the Austrian financial sector. They have voluntarily committed to transition their core business towards climate neutrality and aligning their business activities with the 1.5 degree target set by the Paris Agreement. They act as climate protection pioneers and show that climate protection and environmentally sustainable business practices are compatible. You can find comprehensive information in the Green Finance Alliance handbook.
A future-proof financial system requires new perspectives and models that account for climate related topics. Climate targets and concrete measures must be integrated into existing as well as new processes. To this end, the Green Finance Alliance has defined five target dimensions for the core business of its members:
- Aligning portfolios with the 1.5 degree target of the Paris Agreement
- Creating greenhouse gas-neutral portfolios by 2050: Continuously reducing GHG emissions attributable to portfolio positions
- Expanding green activities in the core business, with the aim of encouraging a positive impact and mobilising capital to fund climate targets
- Managing climate risk and encouraging resilience in the face of future climate and climate-induced change
- Promoting climate governance and mainstreaming in all relevant areas of business
Together with other peers, the initiative’s members contribute to re-direct capital flows towards a sustainable, low-carbon future.
Membership in the Green Finance Alliance offers the opportunity to be a green pioneer. The Green Finance Alliance is intended to become a lead model for climate-conscious action in the financial industry, attracting many more members.
Members of the Green Finance Alliance are accompanied and supported on their path to climate neutrality by the Ministry for Climate Action, the Environment Agency Austria and other experts. Members and are highly visible as being part of a strong group of pioneers, which are actively accepting responsibility.
The list of criteria contains measures relating directly to the companies’ core business. The focus is on alignment with the 1.5 degree target and thus the continuous reduction of greenhouse gas emissions (phase-out of coal, petroleum, and natural gas).
The criteria that apply are science-based and binding for the financial companies’ lending, investment, and insurance business. Compliance is verified through an annual monitoring process. The list of criteria focusses on requirements for the phase-out of fossil fuels, the expansion of green business activities, and transparent annual climate reporting.
Other criteria relate to operational ecology, i.e. the climate-friendly conduct of the companies themselves. Key topics in this regard include a travel policy, procurement practices, the use of electricity generated by renewable energy sources, and the introduction of an operational environmental management system (EMAS).
The alignment of the portfolio with the 1.5 degree target as defined by the Paris Agreement must be achieved by 2040 at the latest. This is also necessary for achieving the climate target of the EU – climate neutrality by 2050.
Because many Austrian financial companies have an international focus, with a particular focus on Central and Eastern Europe, the Green Finance Alliance uses the EU's target of becoming climate neutral by 2050 instead of Austria's target for climate neutrality by 2040.However, in light of the urgency of the climate crisis, we would welcome if the target was met earlier.
Members must therefore align their analysable portfolio with the 1.5 degree target no later than 2040 in order to achieve climate neutrality by 2050. To achieve this, it is necessary to actively support all business customers so that their business activities are aligned with the Paris climate target by 2040.
This measure stipulates that the analysable portfolio is aligned with the 1.5 degree target defined by the Paris Agreement. This target can only be achieved successfully when companies and projects that are provided with financing, insurance, or investments reduce their own greenhouse gas emissions in line with a pathway that is compatible with the 1.5 degree target.
The financial companies in the Alliance can facilitate the process with targeted engagement activities. This implies communicating climate-related strategic expectations to their clients, work with them to elaborate transformational opportunities and accompany them on their transition path. Another measure is divestment, which refers to the phase-out of financing for environmentally harmful activities. One thing that is very clear however is that companies from the fossil fuel sector that take climate protection seriously and adapt their business models accordingly should continue to have access to capital and should receive guidance from financial companies.
The Green Finance Alliance stipulates the use of the → Paris Agreement Capital Transition Assessment (PACTA) or → Science Based Targets initiative (SBTi) for measuring the alignment with the 1.5 degree target. In PACTA, a continuous improvement towards the reference climate scenario must be achieved. PACTA benchmarks either the sectoral production plans for the next five years or the current emissions intensity (for example for the steel or cement industry) with the corresponding climate scenarios. If SBTi is used, the relevant pathways according to the Financial Sector Science-Based Targets Guidance must be applied.
Challenges differ significantly from company to company: For some, it is difficult to phase-out fossil fuels, while for others it may be challenging to comply with the required disclosures or the implementation of an Eco-Management and Audit Scheme (EMAS).
The biggest benefit for members is making a real contribution to climate protection as well as securing a liveable future for our children. Members have the opportunity to position themselves as credible, green pioneers in the eyes of their customers and society. At the same time, the membership provides support and guidance regarding necessary steps for the transformation.
Most likely, that will be the case over the long term. But the effects of the climate crisis, which can already be felt today, show that there is no time to wait for this development to happen on its own. This is also a key reason why numerous regulatory initiatives were launched at the European level (such as the EU Taxonomy Regulation and Sustainable Finance Disclosure Regulation).
On the one hand, the aim for the financial sector is to support the transformation towards a sustainable society. On the other hand, the pace of the transformation towards climate neutrality in 2050 must accelerate significantly. Together with ambitious financial companies, the Green Finance Alliance is positioning itself as a pioneer and a role model on this path.
Financial companies that are just starting with the development of their climate strategy can also become members. The information offerings as well as dialogue opportunities associated with the membership status could be especially helpful for such firms.
The Green Finance Alliance is designed for both, established peers and those looking to become pioneers. What is important in both cases is that financial companies commit to meet the list of criteria. The necessary financial and personnel resources must be provided by the company.
Many EU regulations that will be mandatory for certain groups of financial institutions in the future (e.g. the reporting obligations pursuant to the CSRD, Taxonomy, and SFDR), focus especially on detailed disclosure obligations.
The criteria of the Green Finance Alliance, however, define mandatory requirements with regard to the transition towards the alignment of portfolios to the 1.5 degree target defined by the Paris Agreement, climate neutrality, and the phase-out of fossil fuels. The reporting criteria in the Alliance serve the purpose of disclosing these efforts.
As part of the support, there are workshops, webinars and bilateral talks for members to provide technical as well as scientific information for the implementation of the criteria. Some events are organised in cooperation with our advisory council members, who will share important knowledge about methods, current developments, and other important topics in their role as national and international experts.
In the methodological development of the Green Finance Alliance, international good practice examples are continuously researched and analysed for each criterion. This information is available to interested parties.
Yes. The list of criteria for the Green Finance Alliance pertains to the entire participating company, and thus also to all domestic and foreign subsidiaries to which the list of criteria can be applied.