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Banks and insurers will be better able to identify which organisations are aligned with Paris Agreement goals under a new accreditation framework launched by Willis Towers Watson, the global advisory and broking company says.

A governance committee is currently being established that will finalise the framework, which is known as Climate Transition Pathways and was formally launched on May 4.

Independent third parties involved with the project include the Climate Bonds Initiative – an organisation that facilitates sustainable investment – and consultancy firm Volans, which developed the financial sector’s Bankers for Net Zero initiative.

Willis Towers Watson says that once the framework has been finalised, organisations will be able to use it to demonstrate their climate change credentials in a consistent form, in turn enabling them to benefit from better access to insurance cover and finance.

“To achieve net zero we need a whole economy transition,” says Mark Carney, UN special envoy for climate action and finance and former governor of the British and Canadian central banks.

“Every company, bank, insurer and investor will have to adjust their business models, develop credible plans for the transition and implement them. As insurers take steps to align their underwriting activities with the transition, companies will increasingly need to display that they have the right plans or risk losing access to insurance.”

Rowan Douglas, head of Willis Towers Watson’s climate and resilience hub, adds that the Climate Transition Pathways initiative will mean companies “can continue to access insurance and benefit from a greater level of certainty around the future availability of risk capacity, helping them deliver a more sustainable future”.

Financial institutions will also be able to engage with and offer solutions to organisations committed to measurable change in support of a low-carbon economy, the company adds.

The framework will lean on sector-specific methodologies developed by the Assessing Low Carbon Transition (ACT) initiative, a project launched in 2015 that focuses on the private sector’s role in keeping global warming below 2°C.

The project launch comes as the banking sector faces growing pressure to link financing decisions to companies’ sustainability criteria.

The University of Cambridge Institute for Sustainability Leadership (CISL) has proposed that lenders should offer benefits – such as extended debt financing terms, lower-cost capital or longer tenors – to borrowers who can show their suppliers adhere to environmental standards.

The risks of continuing to finance companies at risk of worsening climate change go beyond environmental damage, with the World Health Organization and Harvard University’s public health school having each warned that climate change is a catalyst for further pandemics.

Rising temperatures increase the transmissibility of water-borne and mosquito-borne infections, while the loss of wild animal habitat can make it easier for diseases to spread to humans, they say.

Yet banks’ role in financing contributors to climate change remains a source of international concern.

Following a damning report that found banks provided US$3.8tn to fossil fuel companies since the Paris Agreement was signed in 2015, G7 finance ministers and central bank heads have discussed finding new ways of pushing the private sector into action.

As well as its role in the Climate Transition Pathways framework, the Climate Bonds Initiative has recently received a “major grant” from the Children’s Investment Fund Foundation to accelerate investments in climate transition within the EU.

The initiative says it will develop transition-related criteria, expand its bond certification scheme and boost its market reporting and data analysis.