The Glasgow Financial Alliance for Net Zero

 Rishi Sunak, the chancellor of the exchequer, said “I’m proud that under the UK’s leadership, the number of financial firms committed to net zero plans has tripled, with the assets now covered totalling $130tn. Harnessing the trillions of dollars controlled by these companies in the fight against climate change is crucial. So I’ve announced new requirements for firms to publish their net zero transition plans. Together we can provide the cash the world needs to stop catastrophic climate change.”

The finance pledge, known as the Glasgow Financial Alliance for Net Zero (GFANZ), will mean that by 2050 all of the assets under management by the institutions involved will be aligned with net zero emissions.

But experts and campaigners cast doubt on the government’s finance claims, pointing out that the banks making the pledge are still free to pour cash into fossil fuels, and need only divert a small slice of their funding to low-carbon ends in the next decade. 

Financial experts say the claims were overblown. The $130tn figure refers to the assets the firms have under management, only a small proportion of which – about a third – will be devoted to low-carbon investments in the crucial next decade, when emissions must be halved to keep temperatures from rising by more than 1.5C above pre-industrial levels.

Simon Youel of the Positive Money campaign group said: “Banks may be preparing to scale up investment in ‘green’ activities, but this announcement says nothing about financial firms’ investments in new fossil fuel projects. States must introduce restrictions against new fossil fuel investments if we are to have a chance of keeping 1C alive.”

“Net zero” has quickly become part of the lexicon on Wall Street and in the City of London, but there’s no consensus on what it means, laying the foundation for misrepresentation and confusion. The absence of consistency “around what net zero means allows for financial institutions to claim they are doing more than they are and makes verification of any claims impossible,” said Cynthia Cummis, technical director and founding partner of the Science Based Targets initiative (SBYi), which certifies corporate climate policies and introduced a Net Zero Standard for companies.

Even the Net Zero Asset Owner Alliance (NZAOA), which has been touted by the UN Secretary-General Antonio Guterres in the past as the "gold standard" for financial sector coalitions, does not explicitly mandate members to implement policies to end investment in coal mines and power plants, Reclaim Finance said. Despite a call from the NZAOA for an end to investment in coal mines and power plants, just four of the 58 institutions in the NZAOA have a "robust" coal policy, it said, with at least 34 still lacking policy to restrict investments in coal developers.

"The financial sector talks a big game on climate, but this report reveals its flagship initiatives to be fundamentally flawed," said Patrick McCully, author of the report and senior analyst for Reclaim Finance. "Employing weak metrics, ducking the hard questions of offsets and absolute emissions, and resolutely ignoring the elephant in the room that is fossil fuels, these financial alliances are failing to address the urgency of the climate crisis."

Former Unilever CEO Paul Polman acknowledged that some of the large banks are moving toward backing projects that help the transition toward zero emissions but said this was financially, not ethically, driven.

“People are starting to realize that implementing the Sustainable Development Goals — which cost $3 to $5 trillion a year — is significantly less than dealing with these horrendous consequences of inaction. And the financial market is actually the first one to understand that. I don’t think they are moving on moral grounds, I want to be honest there, but they are moving on economic grounds,” he stated.