GFANZ members financing world’s largest fossil fuel expansion backers, report states
The Glasgow Financial Alliance for Net-Zero (GFANZ), which convenes finance firms collectively managing more than $150trn of assets, is being criticised for allowing members to continue investing in firms expanding fossil fuel production beyond the limits recommended by climate scientists.
Reclaim Finance has today (17 January) published a report accusing members of GFANZ’s members of, broadly, failing to set policies that “meaningfully restrict finance to companies developing new fossil fuel supply projects”. This is despite the fact that the International Energy Agency’s (IEA) pathway to global net-zero by 2050 for energy systems is predicated on there being no fossil fuel expansion beyond what was agreed upon by the end of 2021.
According to Reclaim Finance’s report, members of GFANZ have financed at least 211 companies involved in significantly expanding global coal mining capacity, oil and gas extraction capacity and the use of fossil fuels in the transport and power sector since the Alliance launched in 2021.
The report states that only 61 of the 161 GFANZ members assessed by Reclaim Finance have implemented a policy to exclude support for new coal mining projects. Even fewer – just nine – have policies in place to end the provision of services for all companies building new coal mines, plants and related infrastructure.
This is despite the fact that GFANZ chair Mark Carney issued a joint statement to members that “there is no rationale for financing new coal projects” and urging them to support global efforts to end unabated coal power generation in the OECD by 2030 and elsewhere by 2040.
Reclaim Finance also only deems one of the 161 GFANZ members it assessed, La Banque Postale, as having a significantly robust policy to end financial support for oil and gas companies developing new supply policies. A further seven members, all French, are deemed as having “moderate” plans in place here.
Race to Zero requirements
GFANZ recently ended a requirement for members to align with the requirements of the UN-backed Race to Zero initiative. The initiative notably tightened its minimum participation requirements before this decision was made by GFANZ, introducing new requirements on financing fossil fuels.
Reclaim Finance acknowledges this in its report but argues that many of the finance sector’s net-zero collaborations which feed into GFANZ do still have a requirement or recommendation for alignment with Race to Zero requirements.
For example, the Net-Zero Banking Alliance (NZBA) is criticised in the report for allowing members to finance fossil fuel expansion after joining the initiative. It accuses the NZBA’s 56 largest members of collectively providing at least $269bn to 102 large businesses involved in fossil fuel expansion.
These 102 businesses are planning projects that would bring into production an extra 137 billion barrels of oil equivalent by 2030, equal to 60% of the new oil and gas the industry intends to bring on-line in this time period. It also accuses these 102 firms of planning to build 92 additional GW of coal power plant capacity. Firms supported include Chinese coal plant developer SPIC and Saudi Aramco.
“Financing new coal mines or oil and gas fields will either lock-in decades of carbon-budget breaking emissions or be stranded by changing economics or regulations,” the report states.
The report calls on all GFANZ members to follow Carney’s recommendations on coal and to also withdraw support from all companies with oil and gas plans not credibly aligned with low or no overshoot pathways to the Paris Agreement’s 1.5C temperature pathway. It states that GFANZ will need to update its guidelines and protocols to ensure that all members do this, including introducing more robust corporate engagement policies.
Additionally recommended are interventions from GFANZ to ensure members bring their lobbying activities in line with the global net-zero transition.
Reclaim Finance’s founder and executive director Lucie Pinson said: “It is business-as-usual for most banks and investors who continue to support fossil fuel developers without any restrictions, despite their high-profile commitments to carbon neutrality.
“Their greenwashing is all the more damaging as it casts doubt on the sincerity of all net-zero commitments and undermines the efforts of those who are truly acting for the climate.”
edie reached out to GFANZ for a response to the report. An Alliance spokesperson said:“This report focuses on an important aspect of the energy transition. It’s clear a lot of work needs to be done to ensure the world is deploying capital consistent with a 1.5C pathway – which is exactly why GFANZ was created. Based on research GFANZ commissioned last year, we know that investment in renewables needs to be four times the levels going into fossil fuels by 2030 to restrict climate change consistent with the aims of the Paris Agreement.
“GFANZ members will detail how they are financing the transition of the energy sector when they publish their interim targets and transition plans. This will allow governments, investors and civil society organizations to track progress towards an economy-wide 4-1 ratio.
“We call on financial institutions not in GFANZ to join the alliances that comprise GFANZ to provide transparency and become part of the solution.”
Join the net-zero debate at edie 23 on 1-2 March
Taking place in London on 1-2 March 2023, edie’s biggest annual event has undergone a major revamp to become edie 23, with a new name, new venue, multiple new content streams and myriad innovative event features and networking opportunities. One of the major changes for 2023 is the creation of a dedicated Net-Zero Stage.
edie 23 will take place at the state-of-the-art 133 Houndsditch conference venue in central London. Held over two floors, the event will offer up two full days of keynotes, panels, best-practice case studies and audience-led discussions across three themed stages – Strategy, Net-Zero and Action. Speakers confirmed for the Net-Zero Stage include Climate Change Committee chairman Lord Deben; the Science-Based Targets Initiative’s senior manager for net-zero Emma Watson; and the Department for Business, Energy and Industrial Strategy’s (BEIS) head of net-zero business engagement Catherine Westoby.