Banks in the Alliance commit to using robust, ambitious, science-based targets to decarbonise their lending and investment portfolios on a 1.5 degree climate trajectory to achieve net zero emissions by 2050.
On the heels of COP 26 Finance Day, banking industry leaders met in
Glasgow to discuss the leadership role of the banking sector towards
net-zero under the UN-convened Net-Zero Banking Alliance
(NZBA) – a game-changing commitment through which the banking sector is
joining forces and mobilising capital at scale to tackle climate
change, the defining issue of the 21st century.
Addressing the climate crisis requires drastic transformation of the
world’s real economy – including food production, energy generation,
transportation and infrastructure – and replacement of outmoded
technology with low-emissions alternatives. This systemic change
requires investment at an order of magnitude and speed that is
unparalleled, with an estimated US$ 100 trillion of investment needed
over the next 3 decades for a clean energy future.
The NZBA brings together over 90 banks
with a collective US$ 66 trillion in assets, representing 43% of
banking assets worldwide to support this rapid transformation of the
global economy. Banks in the Alliance commit to using robust, ambitious,
science-based targets to decarbonise their lending and investment
portfolios on a 1.5 degree climate trajectory to achieve net zero
emissions by 2050.
“Right here is where private finance draws the line,” said
Mark Carney on Wednesday, as he announced the US$ 130 trillion in assets
across 450 financial institutions which are now firmly committed to net
zero under the Glasgow Financial Alliance for Net Zero (GFANZ) – which includes the Net-Zero Banking Alliance. “We
now have the essential plumbing in place to move climate change from
the fringes to the forefront of finance so that every financial decision
takes climate change into account.”
“This will go down in history as one of the most
significant outcomes from this COP – that massive wave of capital in the
Glasgow Financial Alliance for Net Zero’ – Nigel Topping, UN High Level Climate Action Champion for COP26
Participants on Thursday’s banking panel spoke to the strength of the
Net-Zero Banking Alliance, highlighting how it enables banks to join
forces to take a consistent, international approach to net zero,
promoting alignment on key issues such as measurements and disclosures.
By working together, banks can build a common language and share best
practices on technical developments such as carbon accounting, offsets,
target-setting and scenario use.
Critically, the panelists noted that the NZBA convenes a common voice
of the industry, enabling them to collectively engage with regulators
and policy makers for the supportive environment that the banking
community requires to implement net zero across jurisdictions. Banking
leaders drew attention to the need for an enabling policy environment at
the national and international level, calling on governments to set
frameworks and public policies that incentivise green financing and
bring clarity on the pathway ahead for the real economy.
Banks and regulators both noted the tension between the need to
consolidate approaches and reduce fragmentation while still needing to
experiment as the financial system learns and builds capacity together
to seek best-practice, for example on how climate change risks can be
reflected in the capital framework, with careful consideration given to
stress testing scenarios. The Bank of England highlighted their recent PRA report
on climate-related financial risk management and the role of capital
requirements, which sets down their current thinking on the topic as
well as their strategy and planned future work.
Several panellists highlighted the need for a just, orderly
transition of the global economy – a transition which is not simply
about divesting, but instead fully engaging with corporate and retail
clients to accelerate the transition, making it affordable and simple to
help people and businesses prosper even as the economy undergoes a
rapid, seismic shift. The panel also spoke to emerging markets, one of
the key themes at COP26 this year, highlighting the need to ensure a
healthy flow of capital to those areas that need it most, a view echoed
in the G20 Policy Call to Action, recently issued by the GFANZ Principals group.
“If banks are serious about net zero it is quite clear
they can no longer finance the expansion of infrastructure,
technologies and business models that we know are incompatible with the
1.5°C climate goal.” Inger Andersen, Under-Secretary-General of the
United Nations and Executive Director of UNEP in a speech delivered by
Remco Fischer, Climate Lead at UNEP FI
Walking the Talk
Credibility, transparency and delivery are critical components of any
commitment to ensure trust is maintained and strengthened between
financial institutions and the societies they serve.
© UNEP
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