While governments around the world struggle to agree on and meet climate change targets, private sector actors are stepping up to the challenge.
Anyone following this year’s COP26 UN climate change conference might have noticed that the Glasgow Climate Pact did not exactly align with the Paris Climate Agreement goal of capping the world temperature increase at 1.5 degrees Celsius.
An analysis by Climate Action Tracker released during the conference projects at least a 2.4°C increase based on countries’ latest targets.
However, the Glasgow Financial Alliance for Net Zero (GFANZ), launched in April 2021 by former Bank of England governor Mark Carney, believes the 1.5°C temperature target is still achievable based on commitments by its members. At COP26, the organization brought together more than 450 financial firms from 45 countries, representing financial sector net-zero commitments worth more than $130 trillion.
GFANZ is committed to a new initiative to decarbonize investments and pursue the so-called Race to Zero, which aims to halve global emissions by 2030. Member firms say they will take on a net-zero commitment and use science-based guidelines to reach net-zero emissions by 2050; cover all emission scopes, including 2030 interim target settings; and commit to transparent reporting and accounting in line with Race to Zero criteria.
More than 90 of the founding members of GFANZ—banks, insurers, pension funds, asset managers, export credit agencies, stock exchanges, credit rating agencies, index providers and audit firms—say they are already delivering on setting short-term targets. Asset managers have published net-zero targets for 2030 or sooner.
Mark Carney, the UN special envoy for Climate Action and Finance and COP26 finance adviser to UK Prime Minister Boris Johnson, said, “The rapid and large-scale increase in capital commitment to net-zero, through GFANZ, makes the transition to a 1.5°C world possible. To seize this opportunity, companies must deliver robust transition plans and governments set predictable and credible policies.”
GFANZ workstreams include mobilizing private capital to emerging markets and developing countries, engaging industry to catalyze alignment between financial institutions and global industries, accelerating decarbonization in the real economy, creating sectorwide best practices for financial institutions to design credible net-zero transition plans, supporting the effective implementation of portfolio alignment and advocating public policy to help build a net-zero economy.