The Glasgow Financial Alliance for Net Zero (GFANZ) has today launched a consultation on a new common framework for financial institutions to demonstrate the integrity of their climate plans.
Specifically, the draft Net-zero Transition Plan (NZTP) framework will allow stakeholders to judge the credibility of plans to scale clean energy and transition-related finance to levels consistent with limiting global warming to 1.5°C degrees above pre-industrial levels.
It outlines how transition plans must align financial institutions’ core businesses with the reduction of emissions in the real economy.
This could involve increased support for companies already aligned with 1.5°C, financing the development and scaling of net-zero technologies, and accelerating the phaseout of high-emitting assets through early retirement.
The framework is open for consultation until 27 July 2022, and has been endorsed by former mayor of New York City, Michael Bloomberg, and former Bank of England governor, Mark Carney.
“The climate crisis requires ambitious action and the biggest changes must happen without delay,” Bloomberg said. “Businesses require clear guidance from governments to meaningfully address climate change – and GFANZ is taking the lead by providing this information to the global financial industry.”
GFANZ has also published a set of connected tools, frameworks, and resources to enable extensive collaboration between financial institutions, real-economy companies, the public sector, and civil society to support a global whole-economy transition to net zero. These include:
- Guidance on use of sectoral pathways for financial institutions
- Concept note on portfolio alignment measurement
- Introductory note on expectations for real-economy transition plans
- Report on the managed phaseout of high-emitting assets
While the focus is on providing guidance for financial institutions’ implementation of transition strategies, the recommendations and guidance also aim to provide clear, consistent, and decision-useful information needed by companies, regulators, governments, and other stakeholders.
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.”
Image credit: iStock
Author: Chris Seekings