By Jon Sohn

WRI worked recently with Wachovia Bank to develop a number of new environmental commitments, and recognizes them as solid progress towards full accounting of environmental considerations. WRI believes that financial institutions working to quantify the financial costs of GHG emissions who also proactively engage clients on climate change will be better positioned in a carbon constrained economy. At the same time, WRI is engaging financial institutions to develop carbon mitigation strategies in their lending and investment portfolios with a view to reducing global greenhouse gas emissions and shifting investment towards clean energy. There is still much work to do with financial institutions to achieve these goals.

Notably, Wachovia also becomes the latest signatory to the Equator Principles

, a benchmark for the financial industry to manage social and environmental issues in project financing that at its core adopts the environmental and social standards of the World Bank Group's International Finance Corporation (IFC).

Wachovia's announcements, described below, represent a trend among private sector financial institutions to mainstream environmental and social considerations into their business practices. Banks are recognizing the significant opportunities and risks of environmental concerns in their operations. Wachovia joins Goldman Sachs

and JP Morgan among US financial institutions recognizing the need for federal regulation on climate change.

The Details

Wachovia's new Environmental Principles and Commitments

• Global and Local Ecosystem Protection
  
  
• Sustained Use of Natural Resources
  
  
• Waste Reduction & Disposal
  
  
• Energy Conservation
  
  

Wachovia’s Commitment on Climate Change

• A specific call for federal regulation to reduce greenhouse gas emissions
  
  
• A pledge to reduce Wachovia's direct carbon footprint by 10% from 2005 levels no later than 2010
  
  
• A vaguer pledge with respect to indirect emissions that "encourages" Wachovia clients to annually report their greenhouse gas emissions and develop carbon mitigation plans.

Wachovia’s Policy on Forest Protection

• A pledge not to finance projects or operations in areas where major indigenous land claims have not been appropriately addressed
  
  
• A commitment to sustainable timber practices under systems such as the Forest Stewardship Council
  
  
• The creation of "No Go" Zones for support of projects in World Heritage Sites, Areas of High Conservation Value and Primary Forests.

WRI’s Financial Flows Objective works with financial institutions to mainstream environmental risks and opportunities into core strategy. Three WRI projects are housed within the Financial Flows Objective: International Financial Flows & the Environment

, the Electricity Governance Initiative, and Capital Markets Research.

 

Jon Sohn
Senior Associate
Institutions and Governance
November 9, 2006