GFANZ: Investors outline proposals for net-zero framework and guidelines

The consultation runs until 12 September

The Glasgow Financial Alliance for Net Zero (GFANZ) has published enhanced guidance on how investors can measure key metrics of investment, lending, and underwriting activities with their net-zero commitments.

GFANZ’s Portfolio Alignment Measurement Report has been published to gain feedback from the finance sector on whether proposed frameworks will provide relevant metrics and data collection to ensure portfolios are 1.5C aligned.

The report also provides an “illustrative credibility framework” that can assess emissions targets from corporates and net-zero transition plans. GFANZ believes this will help investors map and project future emissions trends of the companies in their portfolios.

“Growing global scrutiny of transition plans makes the need for business action on climate ever more urgent,” GFANZ’s vice chair Mary Schapiro said. If financial institutions are to deploy the capital required to usher in the net-zero transition, they need a way to measure whether their financing activities align to their ambition.”

While more investors are setting net-zero targets, one common concern within the sector is a lack of standardisation on metrics, data and frameworks on emissions across portfolios. The latest guidance aims to address these issues and builds on the 2020 and 2021 work of the Portfolio Alignment Team (PAT).

A consultation on the frameworks and guidance will run until 12 September.

GFANZ launched in April last year in a drive to unite the global financial sector in transitioning to net-zero portfolios by 2050. At COP26, the group revealed it now represented more than $130trn in assets under management.

The Alliance accounts for 40% of the world’s total financial assets, up from $90trn at the start of October. These assets are managed by 450 firms across 45 nations, from all parts of the financial industry.

One of GFANZ’s key aims is to encourage corporates to set more ambitious, science-based targets to help reach net-zero emissions globally. Research published by the TPI last year revealed that only 14% of publicly listed companies in the steel, cement, aluminium, paper and mining sectors are aligning with a 2C temperature pathway. Then, in November 2021, the TPI published an analysis of the temperature pathways of 53 of the world’s largest oil and gas firms, concluding that 48 are not aligning with either Paris Agreement pathway.

This slow progress could undermine the net-zero commitments of investors unless they bolster their sustainability-related plans for engagement and divestment. Most of the world’s largest investors now have net-zero targets – either as a standalone or through collaborative initiatives such as GFANZ. However, there have been repeated calls for new standards to be introduced to help investors assess the credibility of net-zero commitments.