121 3. To Financial Institutions and Investors Financial institutions531 are progressively taking part in various climate initiatives and publicizing their commitments toward climate action. The financial sector is regarded as “the vital link in enabling the kind of system-wide change”532 in achieving a net-zero carbon economy. The sector can steer companies and industries towards a sustainable path by aligning lending and investment portfolios with targets set by science. Although their direct emissions are negligible, their role as financiers of the sectors and projects that generate GHG emissions, including and most significantly, the fossil fuel industry, make them similarly accountable for global warming and climate change. To meet the targets of the Paris Agreement, the global carbon budget demands the cessation of new fossil fuel extraction, and the creation of more infrastructure in support of renewable energy. This would be possible if financiers break away from lending and investing in carbon-related industries. i. Financial Institutions Must Refrain from Financing Fossil Fuel-Related Projects and Instead Direct Capital Towards ‘Green’ Projects The Commission fully supports the latest version of the Equator Principles (EP4),533 and recommends its adoption by all financial institutions. The Equator Principles serve as a framework for financial institutions to identify, assess and manage environmental and social risks when financing projects. Those who subscribe to them, called the Equator Principles Financial Institutions (EPFIs), commit not to provide Project Finance, Project-Related Corporate Loans to Projects or Project-Related Refinance and Project-Related Acquisition Finance to projects that are not compliant with Equator Principles requirements. Principle 2 of the EP4 requires clients to conduct an environmental and social assessment of their proposed projects. Such assessment specifically includes 531 532 533 “The core participants in the finance sector include banks, insurance companies, pension funds, fund managers, mutual funds, sovereign wealth funds, charities and endowment funds.” See United Nations Environment Programme Finance Initiative, Financial Institutions Taking Action on Climate Change (2014). Science Based Targets, Financial Institutions, available at https://sciencebasedtargets.org/sectors/ financial-institutions. The Equator Principles, supra note 419.