Reclaim Finance published a comprehensive report at COP26 in Glasgow revealing the extensive shortcomings in the finance sector’s rapidly growing “net-zero” alliances. If these shortcomings are not fixed, the alliances will very likely fall far short of their ambitious but necessary goal of halving the emissions from the clients of investors, banks and insurance companies by 2030.

The report analyses the six “net-zero” finance sector alliances covering asset management and ownership, banking, insurance, investment advice and provision of data. These alliances are grouped together under the umbrella of the Glasgow Financial Alliance for Net Zero (GFANZ), headed jointly by Mark Carney, the former Governor of the Bank of England, and US financial data billionaire Michael Bloomberg.

At COP26 GFANZ announced that more than 450 financial firms with assets supposedly exceeding $130 trillion — equal to more than half of the world’s investable private capital — had joined at least one of the GFANZ alliances.

Too vague, too weak, too slow

The report shows that the alliances fail to require their members to halt financing of new fossil fuel supply projects, to adopt absolute emission reduction targets, or to exclude the use of offsets. The timelines given for financial institutions to set emission reduction targets and to act on meeting these targets are also far too slow.

Meeting urgency with foot-dragging

The report shows that only the Net-Zero Asset Owner Alliance (AOA) requires its members to set 2025 targets.  The others only require targets for 2030.  The Net-Zero Banking Alliance allows its members to take until mid-2024 just to set targets for some of the most carbon-intensive sectors, and until 2025 to disclose how they will meet all the targets. Meanwhile, members of the Net Zero Asset Managers initiative could conceivably wait until 2050  to set targets across all their assets under management.

The AOA is the oldest and the most ambitious of the GFANZ entities. Yet it has failed to translate strong principles into obligations for its members. The Alliance calls for an end to investments in new coal mines and power plants but does not mandate its members to implement policies to this end. As of mid-October 2021, at least 34 of the 58 AOA members lacked a policy to restrict investments in coal developers.

The report argues for the GFANZ alliances to require their members to start a rapid wind-down of financing for fossil fuels, in line with the International Energy Agency’s recent reports and with climate science. That means an end to the provision of financial services to companies planning new coal, oil or gas supply projects, and a phasing out of support to companies failing to scale down their fossil fuel production at the rapid rates required to align with 1.5°C.

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