GFANZ publishes transition plans framework amid credibility concerns

The Glasgow Financial Alliance for Net Zero (GFANZ) has unveiled new guidance to help banks and investors support the net-zero transition. The move comes as the multi-trillion dollar coalition seeks to assuage doubts about the credibility of commitments made by its members.

Released to coincide with the Cop27 summit, the voluntary framework features detailed instructions on how financial firms can develop and implement climate transition plans. It considers their role in supporting businesses in the real economy at different stages of alignment with global climate goals.

The guidance includes advice regarding:

• financing green technologies and services;
• supporting companies already aligned with a 1.5ºC pathway;
• helping companies on their journey to 1.5ºC alignment;
• accelerating the phase-out of assets associated with high carbon emissions.

Despite this, GFANZ has been criticised for its membership criteria, which some analysts consider to be overly lax. A recent open letter published by Sierra Club, ShareAction and others called on the alliance to require its members to phase down unabated fossil fuels and address all financed and facilitated emissions in their transition plans.

Although GFANZ signatories are currently required to publish a transition plan within 12 months of joining the scheme, it is not yet mandatory for this to cover activity such as fossil fuel underwriting. Climate groups believe underwriting of capital market transactions is now the principal way by which banks are helping many fossil fuel companies raise money.

Last week Mark Carney, GFANZ’s co-chair, was forced to defend a decision to allow several member banks to remain part of the alliance while dropping out of the stricter Race to Zero (RtZ) initiative, which is backed by the United Nations. GFANZ previously required adherence to RtZ rules, but Carney said this provision has been abandoned citing antitrust concerns.

Nevertheless, Nigel Topping and Mahmoud Mohieldin, who lead the RtZ campaign, stressed that the GFANZ guidance is consistent with RtZ objectives.

“We welcome GFANZ’s pan-sector net-zero transition plan guidance and accompanying frameworks as important tools for helping the financial institutions in the UN climate champions’ Race to Zero to translate their net-zero commitments into actionable plans with real-economy impact,” they said in a statement.

Topping and Mohieldin have encouraged firms to respond to a call for feedback on the transition plan framework, which is open until 27 July 2023.

“The consultation process is an opportunity for financial institutions to demonstrate leadership in helping to shape the best practices that will drive the ambitious climate action we need to achieve the Paris goals,” they added.

Jeanne Martin, head of ShareAction’s banking programme, urged GFANZ’s sub-alliances and members to “live up to their responsibilities” to support the phaseout of fossil fuels in line with a 1.5ºC pathway. But she expressed scepticism that voluntary initiatives will be enough to drive the “urgent action needed to secure a liveable future”.

“Governments should step up with tougher regulation of financial institutions that continue to fund fossil fuel expansion,” she argued.