The Glasgow Financial Alliance for Net Zero (GFANZ), the coalition of seven financial sector net-zero alliances, has set out how early retirement of high-emitting assets can be a credible net zero-aligned strategy.
The outline of the group’s thinking on managed phaseout is set out in a net-zero transition plan framework for financial institutions that GFANZ is now consulting on until 27 July. Developed by a workstream including representatives from BlackRock, Citi, and Nordea Life & Pension, a separate report on managed phaseout delves into the subject in more detail.
The publication of these and other resources coincided with the UN-backed Race to Zero campaign, the umbrella organisation for GFANZ members and other initiatives, announcing updates to its baseline criteria that included “making explicit the requirement for members to phase down and out all unabated fossil fuels as part of a just transition”.
“In practice, this means corporations and investors must restrict the development, financing, and facilitation of new fossil fuel assets, which includes no new coal projects,” the campaign said.
“The exact pathways and timelines naturally differ across regions and sectors.”
Another baseline criterion that finance groups must now definitely meet to remain members of the Race to Zero campaign include publicly disclosing a transition plan within 12 months of joining the campaign.
More explicit requirements were also set for ensuring financial institutions address all Scope 3 emissions in their planning.
“These new Race to Zero criteria throw down the gauntlet to Carney and Bloomberg and the GFANZ alliances”
Paddy McCully, senior analyst at NGO Reclaim Finance
“The clarity these criteria provide, together with strengthened data transparency, will help us identify the progress made and gaps remaining,” said Nigel Topping and Mahmoud Mohieldin, high-level climate champions for COP26 and COP27.
“They will clearly show those actors who are truly moving ahead versus those who are trying to find loopholes. We urge all Race to Zero actors to keep stepping up, or risk being removed from the Race!”
Launched last year, GFANZ is comprised of the UN-convened Net-Zero Asset Owners Alliance, the Net Zero Asset Managers initiative, and other finance sector net-zero groupings. Chaired by Michael Bloomberg and Mark Carney, it does not set its own compulsory requirements, but instead requires compliance with the criteria of the Race to Zero.
A spokesperson for GFANZ said the tools and frameworks that it published yesterday helped financial institutions to make good on their net zero commitments in line with the Race to Zero criteria.
Carney 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. The supporting tools will promote the responsible and transparent phaseout of stranded assets as part of an orderly transition.
”Together, these tools, frameworks, and resources will guide the financial sector to support real-world decarbonisation, not the false comfort of portfolio decarbonisation. In the process, they will reveal the contribution of financial institutions to solving one of humanity’s greatest challenges.”
Paddy McCully, senior analyst at NGO Reclaim Finance, said the new Race to Zero criteria “throw down the gauntlet to Carney and Bloomberg and the GFANZ alliances and will require major improvements in what the alliances demand from their members”.
Alex Wilks, senior strategist at The Sunrise Project, a campaign network, hailed the Race to Zero criteria update as “great progress in holding GFANZ, the Net Zero Asset Managers Initiative and the other net-zero finance schemes to a far higher standard on fossil fuels” but said it would “still take a lot of work to ensure real accountability for action”.