Glasgow Finance Alliance for Net Zero (GFANZ)
Glasgow Finance Alliance for Net Zero is a global coalition to help accelerate the process of transition to a net-zero economy in order to achieve the goal of Paris Agreement to limit global temperature increases to 1.5°C from pre-industrial levels. Recognizing that financial institutions have the capital and influence to drive the change, GFANZ has brought companies, banks, insurers, and investors, that are having the most problem transitioning to net-zero, to engage in GFANZ to adjust their business models.
Background
The Glasgow Finance Alliance for Net Zero was first initiated at COP26 in 2021, aiming to tackle the global warming crisis. Mark Carney, the Co-Chair of GFANZ and the former Bank of England governor, announced their goal as accelerating the decarbonization of the global economy. He emphasizes on real-world emissions reductions and investment in climate solutions, including financing the development of renewable energy sources, energy efficiency measures, and other technologies critical to the transition to a low-carbon economy. Besides, GFANZ advocates for elimination of financing for fossil fuel projects.
GFANZ is an umbrella term that they have alliance members of more than 500 firms, being part of the seven subgroups by sector. The goal of all of these firm is to reach net zero by 2050 as well as their other environment targets by 2030.
GFANZ outlines that their objective is to motivate financial institutions to commit to net-zero as they are important CO2 emitters, and helping them transitioning towards a greener and more sustainable business model will accelerate the decarbonization process.
Relationship to other organizations
GFANZ is under the initiative of “UN Race to Zero” with several other initiatives, including Net-Zero Asset Owners Alliance (NZAOA), Net Zero Asset Managers initiative (NZAMI), Paris Aligned Asset Owners (PAAO), the Paris Aligned Investment Initiative (PAII), and Climate Action 100+ signatory commitments (CA100+). GFANZ actively engage with all these alliances to advocate for guidance.
The initiatives recommend all financial institutions to voluntarily disclose their activities using the Task Force on Climate-Related Financial Disclosure (TCFD) framework. The disclosure is important because investors’ climate data is necessary for tracking the reduction in CO2 emissions and evaluating the progression towards net-zero goals.
Besides, GFANZ also collaborates with Non-Government Organizations (NGOs), civil societies to refine its strategies in order to address its critisms to greenwashing.
Criticism and Controversies
GFANZ has encountered several challenges criticisms although it sets a positive goal. One of the criticism is that it does not have an strict enforcement power over the financial institutions that there is successful transition and emission reduction taken place, leading to potential risks of greenwashing.
In October 2022, several of its members left the alliance because of the new rules and restrictions applied in reduction in fossil fuels investments. GFANZ’s leading members, especially those large American firms such as JP Morgan, Morgan Stanley and Bank of America were also unsatisfied with the proposed restrictions on their investment category. GFANZ also faces criticism because their guidance has not required financial institution to stop funding deforestation as part of the net zero commitment.
Mark Carney, the Co-Chair of GFANZ , has announced a pledge at the end of 2022 that $130 trillion would be deployed on the net-zero mission while this announcement faced skepticism that the goal seems ambitious but intangible. Critics doubt its actual impact on climate assistance for developing countries, and questioned the effectiveness and transparency of the alliance commitment since many of the members have continued their investment in fossil fuels. Mark Carney faced criticism with skeptics questioning whether the alliance was aimed at enhancing his own personal legacy.
Get up to speed
Glasgow Finance Alliance for Net Zero (GFANZ) website
Financial Times Article of GFANZ
The WSJ podcast “Infighting Hampers U.N. Green Finance Group”
The video “COP26 & The Glasgow Financial Alliance for Net Zero(GFANZ)”
Data Sources
No relevant data sources were found due to the fact that the alliance is relatively recent and the disclosure of its members is voluntary.
Conclusion
Looking ahead, GFANZ aims to expand its membership and influence, driving broader and deeper commitments across the financial sector. The alliance also focuses on enhancing the credibility and transparency of its members’ commitments, developing more robust frameworks for tracking and reporting progress as it is currently GFANZ’s biggest controversies.
The role of finance in facilitating a just and orderly transition to a net-zero economy has never been more critical as the whole world faces the challenge brought by climate change. GFANZ presents effort to potentially transform the financial sector for the good of the planet. However, the success of this initiative will ultimately depend on the willingness of its members to translate their commitments into action and the ability of the global community to hold them accountable.
In conclusion, GFANZ has the potential to play a crucial role in the transition to a sustainable and resilient global economy by aligning financial flows with the goals of the Paris Agreement. There has not been much data to showcase its progress on net-zero since the initiative is relatively recent. However, hopefully with GFANZ, the financial sector is taking significant steps in the right direction.