The Principles for Responsible Investment’s Nathan Fabian has penned a defence of, and encouragement for, net zero finance sector alliances but said that “a clear-eyed view” of investment managers and other actors’ different roles was necessary.
In a blog post, the PRI’s chief sustainable systems officer said the Glasgow Financial Alliance for Net Zero (GFANZ) and the net zero alliances united through it had already been “incredibly successful” in addressing the challenge of securing better outcomes by working together rather than in isolation.
The alliances served a vital role in “creating test beds for policymakers and regulators to observe and build confidence in good practice – which is why governments and regulators around the world (should) welcome them”, he added.
Fabian’s blog post comes after he spoke on a panel at the University of Oxford in July, responding to a comment about potential greenwashing by GFANZ by saying: “We didn’t say what we meant when GFANZ started, and too often we don’t say what we mean.”
The senior PRI figure also said: “The idea that a manager with a corporate ownership, who serves millions of different individual clients, can set its own 2050 target and faithfully implement that – supposedly on somebody’s behalf – was frankly never going to work. But that doesn’t mean that managers aren’t absolutely essential to the transition.”
The PRI directly supports four of the net zero alliances in GFANZ: the Net Zero Asset Owners Alliance, the Net Zero Asset Managers Initiative, the Net Zero Financial Services Providers Alliance and the Net Zero Investment Consultants Initiative.
In his new blog post, Fabian said it was “imperative” to take a “clear-eyed view of the different roles of ultimate investors and those who are managing or advising on their money”.
Likewise, it was important to be clear about how different financial actors are using tools such as targets and transition plans. This much-needed clarity, he said, “will serve to advance the work of GFANZ and the net zero alliances at the forefront of the transition process”.
“Simultaneously, such progress will help safeguard against criticism levelled against collaborative alliances as they work to support prudent decision-making,” Fabian added in the blog.
“As the members of these investment alliances know, they are where the work and the transparency start and not where it ends,” he continued. “The work of the net zero alliances is at the very start of a multi-decade process. Nobody should consider the job done yet.
“While we continue to take on this important work, we must maintain our ongoing commitment to evolving what we do, consistent with the demands of the users of the financial system and the changing world around us.”
Writing in the blog, Fabian also said that the ”argument that the work of the net zero alliances is rooted in good and prudent execution of fiduciary responsibility is rock solid – our industry knows this”.
Almost since their very inception, at least some of the net zero finance sector alliances have faced questions over the legality of their ambitions.
In 2022 a number of the biggest names in the net zero banking sub-group threatened to quit over concerns they would be sued for agreeing to phase out fossil fuels as part of updated rules and this year insurers did just that, with 10+ names leaving the Net Zero Insurance Alliance (NZIA) following letters from Attorneys General in 20 US states. This in turn revived questions about the future of these climate groups and GFANZ.
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