Carney-Led Climate Group Asks Investors to ‘Make Good’ on Net Zero

It’s time for financial institutions to “make good on their commitments” to eliminate carbon emissions from their portfolios, according to the finance industry’s biggest climate coalition.

The Glasgow Financial Alliance for Net Zero, which includes insurers, banks and asset managers overseeing a combined $130 trillion of assets, published a series of documents Wednesday it says provides a template for how finance firms can enable the global economy to pivot from fossil fuels to clean energy. The centerpiece of its efforts is a proposal for what credible net-zero transition plans for finance firms should look like. The plan would require banks to detail the actions they will take, the metrics by which their progress should be judged and evidence that their decisions are aligned with the ultimate objective of limiting global warming to 1.5 degrees Celsius.

Mobilizing the finance sector to get behind efforts to lower greenhouse gas emissions is central to the mission of GFANZ, which was set up last year by former Bank of England Governor Mark Carney. The banking industry has been widely criticized for helping oil, gas and coal companies raise more than $4.5 trillion since the Paris climate agreement was announced at the end of 2015. Forcing banks to explain how they will support the energy transition, as well as how they will navigate issues such as so-called stranded assets, will help show who’s really following through on their pledges and who isn’t.

The proposals are designed “to ensure that financial institutions make good on their commitments in a credible, transparent manner, in line with the need to accelerate action that has been identified by climate scientists,” said GFANZ Vice Chair Mary Schapiro, who’s also vice chair for global public policy at Bloomberg LP, the parent of Bloomberg News,

GFANZ’s transition plan recommendations, which were set forth in a public consultation document, are designed to force companies to translate their net-zero commitments into “a coherent strategy with specific objectives and actions aimed at reducing real economy greenhouse gas emissions.” The plan also should be in keeping with what scientists say is needed to limiting warming to 1.5 degrees “with low or no overshoot.”

Having a transition plan “allows for accountability and signals to both internal and external audiences that an institution’s steps toward net zero are deliberate, transparent and have high integrity,” GFANZ said. Credible plans will provide funding for so-called climate solutions such as renewable energy; support companies that are already aligned with a 1.5 degrees future, as well as those that aren’t, including those from high-emitting sectors; and help facilitate or finance the “managed phaseout of high-emitting physical assets” such as coal plants.

In addition, “given the potential for greenwashing of business-as-usual financing activities, financing for high-emitting companies and assets should be vigorously scrutinized to ensure net-zero alignment,” according to GFANZ.