Finance giants to G20 leaders: Close policy loopholes to end financing for activities that will derail net-zero
An alliance of finance giants collectively representing $90trn in assets is urging G20 nations to end fossil fuel subsidies, bolster carbon pricing and introduce new climate mandates for businesses, to ensure long-term net-zero pledges are credible.
The call to action is being made by the Glasgow Financial Alliance for Net-Zero (GFANZ) – an initiative established earlier this year in the hopes of uniting the global financial sector on the transition to net-zero by 2050, chaired by Mark Carney.
A new report from the Alliance, published today (11 October), is addressed to policymakers across the G20, ahead of the nations’ meeting in Rome later this month.
It urges unified commitments to the Paris Agreement in line with 1.5C; the UN’s recent Synthesis Report on Nationally Determined Contributions (NDCs) to the Paris Agreement concluded that current commitments would deliver a projected decrease in global emissions of 12% by 2030, compared to 2010 levels. However, a 25% decrease would be needed to deliver a 2C world, or a 45% decrease to deliver a 1.5C world.
The GFANZ report additionally calls for more clarity from governments on how net-zero will be achieved in high-emitting sectors, and more international coordination.
Beyond these top-level recommendations, the report makes the case for a string of changes to regulation regarding government subsidies and mandates for the private sector.
On the former, it calls for all G20 nations to follow the G7’s lead and outline plans to phase-out fossil fuel subsidies. The G7 meeting in Cornwall this year resulted in all nations pledging to end direct government support for new thermal coal generation capacity without co-located carbon capture and storage (CCS) technologies by the end of this year. All other “inefficient” fossil fuel subsidies will be phased out by 2025.
By some estimates, G20 member countries have collectively provided $3.3trn in subsidies to the fossil fuel industry since 2015.
For the private sector, the report recommends that governments introduce a mandate requiring all large businesses and public enterprises to develop transition plans for net-zero by the end of 2024. Such plans detail how organisations intend to manage the social and economic impacts of the transition. Organisations should also, the report states be required to disclose their emissions footprint and climate risks in a unified manner.
Additionally detailed in the GFANZ report are recommendations for aligning carbon pricing trajectories with net-zero by 2050; ending deforestation and supporting efforts to standardise and scale the Voluntary Carbon Market. This latter point comes as no surprise, given that Carney heads up the Taskforce on Scaling Voluntary Carbon Markets, which recently formed its new governance body.
“Financial firms can’t deliver sustainable economies alone — clear, credible, and ambitious climate policies are needed from G20 governments,” Carney, the current UN special envoy for climate action and finance, said. “The next few weeks in this decisive decade will help determine whether we avoid climate catastrophe. The core of the financial sector is stepping up – it’s time for major economies to do the same.”
Reports of reluctance
Despite the report’s tone and Carney’s rhetoric, the Financial Times is reporting that some of the 59 banks signed up to the GFANZ are resisting adopting measures that would align their activities with 1.5C – or recommending these measures more broadly.
A source close to the discussions told the publication that some banks believe that the International Energy Agency’s (IEA’s) roadmap to net-zero by 2050 is “a fairytale” that “no one is willing to put their name against”.
Published earlier this year, the IEA roadmap sets out more than 400 milestones on the global journey to net-zero, including some measures to be taken immediately. Among the milestones is a call for all new fossil fuel extraction and exploration to be halted immediately and for new petrol and diesel cars to be banned from sale globally by 2035.
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