Three Key Points of the Carbon Principles

Carbon Principles pic

Carbon Principles
Image: morganstanley.com

As the vice chairman of investment banking at Wells Fargo Securities in New York, Eric Fornell helps clients maximize their return on investment. He largely works with clients in the energy and utility sectors and major Wall Street banks. Eric Fornell’s experience allowed him to contribute to the banks’ development of the Carbon Principles.

In 2008, three of America’s largest financial institutions worked together to establish the Carbon Principles. These guidelines provide a framework for determining which energy-sector projects are environmentally clean enough to finance and which ones may be too risky. In order to stay ahead of federal regulators and avoid risk, Citigroup, JP Morgan Chase, and Morgan Stanley agreed to three overarching commitments:

1. Encourage investments in renewable and cost-effective energy sources rather than fossil fuels. Clients should be encouraged to consider the value of reduced and avoided CO2 emissions in their investments.

2. Use the jointly established Enhanced Diligence Process to evaluate potential transactions. All three partnering institutions agree to use the same process for evaluating energy projects and for determining what terms can be offered to finance certain projects.

3. Foster environmental education within the financial world. Clients, regulators, and related professionals need to understand the new requirements for financing and how the Enhanced Diligence Process changes their responsibility to evaluate projects.

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