New voluntary guidance to support financial institutions in their net zero transition planning has been unveiled by the Glasgow Financial Alliance for Net Zero (GFANZ).
GFANZ, a coalition launched at COP26 last year which includes investors with $150 trillion (£131tn) in assets, updates on work to mobilise capital to emerging markets and developing economies (EMDEs) to support their net zero transitions.
The Financial Institution Net Zero Transition Plan outlines how to develop a transition plan, implementing actions and accountability mechanisms that turn net zero commitments into action.
The framework addresses investments, financing, insurance and the related products and services necessary to support real-economy net zero transition.
It focuses on enabling four aspects of transition finance:
- The climate solutions – i.e., the technologies and products – that will enable the economy to decarbonise;
- Business models already aligned with a science-based pathway to achieve net zero;
- Companies with credible transition plans who are in the process of aligning with a science-based decarbonisation pathway; and
- Managed phaseout of high-emitting assets that will be stranded in the transition to net zero
A report by GFANZ found a seven-fold increase from the current investment – an additional $1 trillion (£0.88tn) per year by 2030 – is required for clean energy in EMDEs alone for the world to be on track to reach net zero by 2050.
It believes while finance plays an essential role, it “cannot substitute for government policy and certain responsibilities cannot be shifted to the financial sector.
It has therefore also issued a call to action to G20 governments to close the gap between their climate commitments and policies through their own transition planning and reform of the international financial architecture.
Mark Carney, Co-Chair, GFANZ and UN Special Envoy on Climate Action and Finance, said,:“One year after COP26, GFANZ members are following through on their high-ambition net zero commitments by creating a holistic framework for net zero transition strategies, setting interim targets, taking action to support real world decarbonization, and improving accountability. That accountability extends to governments and international financial institutions who—based on the real-world experience of GFANZ members—must now deepen their efforts to address climate change. The finance is there if the world truly wants to meet its climate goals.
“With today’s transition planning framework, we can accelerate the speed and scope with which these enormous financial resources are put to work to achieve the world’s goals.”