UN-Backed Net Zero Finance Group Unveils Framework to put Finance Industry’s Climate Commitments into Action
The Glasgow Financial Alliance for Net Zero (GFANZ), a UN-backed climate-focused coalition of financial institutions, announced today the launch of its proposed Net-zero Transition Plan (NZTP) framework, aimed at guiding investors, banks, insurance companies and other financial services providers on putting their net zero commitments into action.
Launched in April 2021, GFANZ brings together several leading net zero groups representing sectors across the financial industry including asset owners and managers, banks, insurers, investment consultants, service providers and investors. The coalition has reached more than 450 member firms around the world, representing over $130 trillion in assets.
Members of GFANZ have committed to supporting global climate goals, through the use of science-based guidelines to reach net zero across all emissions scopes by 2050, including setting interim targets, and providing transparent reporting and accounting on progress.
The new draft framework from GFANZ aims to provide sector-wide guidance for firms to develop and implement credible, science-aligned transition plans in order to put these commitments into action.
Mary Schapiro, Vice Chair of GFANZ, said:
“To cut global emissions in half by 2030 and meet the goal of net-zero emissions by 2050, we need to significantly scale up private capital to companies and assets that are enabling the net-zero transition. But without a clear framework for the transition, progress will be difficult to achieve. Filling the gaps of ambitious climate public policies and regulation, GFANZ has developed a global baseline for financial institutions to turn their commitments into immediate action.”
The framework defines a net zero transition plan as “a set of goals, actions, and accountability mechanisms to align an organization’s business activities with a pathway to net-zero GHG emissions that delivers real-economy emissions reductions in line with achieving global net zero,” and sets criteria for GFANZ members’ plans to be consistent with achieving net zero by 2050, at the latest, and to be “actionable, measurable, focused on the near term, based on climate science,” and to provide for transparency and accountability.
The guidance identifies four key real economy emissions reduction approaches that financial institutions can pursue, including directing capital and support to climate solutions to replace high emitting sources and activities, supporting companies already aligned with global climate goals, enabling both high- and low-emitting companies to align business activities with sector-appropriate emissions-reduction pathways, and enabling the accelerated phase-out of high-emitting assets.
The primary components of net zero plans outlined in the framework include the setting of objectives and priorities for the plan, including targets, milestones and timelines, an implementation strategy encompassing the alignment of products and services with a 1.5°C pathway, embedding net zero objectives into core decision-making processes and establishing policies for priority sectors, and the organization’s engagement strategy for clients, portfolio companies, industry peers, as well as government and public sector lobbying. The framework also provides recommendations to set targets against key metrics supporting the net zero strategy and priorities.
The draft framework is open for public consultation until July 27. Click here to access the report and consultation.
Mark Carney, Co-Chair, GFANZ and UN Special Envoy on Climate Action and Finance, said:
“The GFANZ common framework for net-zero transition will help ensure that capital will flow to companies that have robust and credible plans to reduce their emissions while growing jobs and our economies.”
Michael Bloomberg, Co-Chair, GFANZ and UN Special Envoy for Climate Ambition and Solutions, added:
“The climate crisis requires ambitious action and the biggest changes must happen without delay. Businesses require clear guidance from governments to meaningfully address climate change—and GFANZ is taking the lead by providing this information to the global financial industry.”