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Call for Evidence

The financial sector and the UK’s net zero transition

A significant element in preparations for the UK’s presidency of the UNFCCC COP in November 2021 was the focus on the role that finance could play in supporting the transition to net zero.  As part of this, the Glasgow Financial Alliance for Net Zero (GFANZ) was established as a coalition of global financial institutions which have made commitments to “accelerating and mainstreaming the decarbonisation of the world economy and reaching net-zero emissions by 2050.”[1] GFANZ was launched at President Biden’s climate summit in April 2021 by Mark Carney, UN Special Envoy for Climate Action and Finance and the Prime Minister’s Finance Advisor for COP26, in collaboration with the UN’s Race to Zero and the UK-Italian COP26 Presidency.[2]

GFANZ describes its role as to provide a “practitioner-led forum for financial firms to collaborate on substantive, crosscutting issues that will accelerate the alignment of financing activities with net zero and support efforts by all companies, organisations, and countries to achieve the goals of the 2015 Paris Agreement.”[3]

Applications to join the UN Race to Zero campaign, with which GFANZ is aligned, are reviewed by an academic-led Expert Peer Review Group to ensure that applicants are aligned with the Race to Zero criteria, which are:

  • To use science-based guidelines to reach net-zero emissions across all emissions scopes by 2050;
  • To set 2030 interim targets that represent a fair share of the 50% decarbonisation required by the end of the decade;
  • To set and publish a net-zero transition strategy;
  • To commit to transparent reporting and accounting on progress against those targets, and
  • To adhere to strict restrictions on use of offsets.

By November 2021 GFANZ had over 450 financial firms from 45 countries, responsible for assets of over $130 trillion as members.[4] This represents nearly 40 per cent of total global private financial assets.

GFANZ consists of seven sub-sectoral alliances, which have been tailored to the different stakeholders in the finance sector:

  • Net-Zero Banking Alliance
  • Net Zero Asset Managers initiative
  • Net-Zero Asset Owner Alliance
  • Paris Aligned Investment Initiative
  • Net-Zero Insurance Alliance
  • Net Zero Financial Service Providers Alliance
  • Net Zero Investment Consultants Initiative

The Environmental Audit Committee considers that the global reach and total assets covered within these initiatives, and the increasing use of net zero statements as part of corporate climate strategies issued by banks, insurance companies, pension funds, asset managers and other stakeholders which is already in the public domain, could play a significant role in helping determine whether the UK Government’s carbon budgets and its net zero target are likely to be met. Success would depend, however, on the signatory firms following through on their commitments effectively, and on others joining them. 

Research carried out by the Intergovernmental Panel on Climate Change (IPCC) found that emissions from fossil fuels are the dominant cause of global warming. In 2018, 89% of global CO2 emissions came from fossil fuels and industry. The IPCC warns that fossil fuel emissions must be halved within 11 years if global warming is to be limited to 1.5°C above pre-industrial levels.

Whereas the states which are party to the UNFCCC are increasing their climate ambitions and are setting ambitious net zero emission targets, few have explicitly recognised or planned for the rapid reduction in fossil fuel production that these targets will require. The UN Environment Programme’s Production Gap Report of October 2021 states that the world’s governments plan to produce more than twice the amount of fossil fuels in 2030 than would be consistent with limiting warming to 1.5°C.[5] The initial UNEP Production Gap report of November 2019 found that governments were planning to produce around 50% more fossil fuels by 2030 than would be aligned with limiting warming to 2°C, and 120% more than would be consistent with keeping warming to 1.5°C.[6] The pathway to net zero by 2050 charted by the International Energy Agency in its May 2021 report explicitly ruled out any need for investment in new fossil fuel supply.

In the private sector, the headline commitments made by financial firms do not at present make clear reference to their intentions on fossil fuel investment. Signatories will need to disclose their fossil fuel investments when setting their net zero targets, so that the route private finance intends to take to wind down fossil finance and accelerate the green energy transition is clear, as is the ultimate future of assets from which finance is to be withdrawn.

Investors in fossil fuel concerns, while potentially benefitting from short-term returns on their investments, face increasing risks that their assets will be stranded, whether through government regulation limiting the use of fossil fuels or changes in demand as technological development enables renewable energy generation to supplant the use of fossil fuels. Those whose investment strategies are based on the decisions of major investors in fossil fuel concerns—from banks, pension funds, insurance companies and universities down to individual investors—risk losing out on returns in the medium to long term.

The decision by the Chancellor of the Exchequer to establish the UK as the world’s first ‘net zero financial centre’ invites review of the investment strategies of investors with a British presence.

The Committee has therefore agreed the following actions:

  • To inquire into the initiatives and their impact, with particular regard to:
    • Corporate approaches to the financing of existing and planned fossil fuel projects;
    • The potential effectiveness of the financial sector, including through alliances such as GFANZ, in encouraging the decarbonisation of the economy in time to limit global temperature rises to 1.5°C;
    • Pathways to reducing investment in fossil fuel extraction;
    • Current and planned investment in renewable energy generation, distribution and storage;
    • The effect (if any) on the pace and scale of disinvestment plans of disruption to supply chains and energy markets arising from the 2022 Russian invasion of Ukraine, and what is being done to mitigate any such effects, and 
    • Likely pathways to the responsible retirement of fossil fuel assets, in a way which is compatible with the UK’s national interest, reducing the risk of stranded assets and meeting the UK’s international climate obligations.

Submissions addressing any or all of the above points are invited, to be received by the Committee not later than 5pm on Thursday 30 June 2022. (It is recommended that all submitters familiarise themselves with the Guidance on giving evidence to a Select Committee of the House of Commons which outlines word count, format, document size, and content restrictions.)


  • To write to leading signatories to GFANZ which have their headquarters in the UK or have substantial operations here to seek a public statement on their fossil fuel policies, their policies on investment in renewable energy technologies, and on whether they support the International Energy Agency’s May 2021 conclusion that no new investment in fossil fuel initiatives is necessary to meet global energy needs if its pathway for net zero by 2050 is followed.

The responses in each case would be published for scrutiny, enabling the assessment of claims made by institutions against their observable practice, particularly in the run-up to COP27 in Sharm-el-Sheikh in November 2022.

The exercise will illustrate how those elements of the private finance sector which have subscribed to net zero declarations intend to phase out fossil fuel investments and support investment in renewable energy technologies as part of a net zero strategy.


[1] The Glasgow Financial Alliance for Net Zero: Our progress and plan towards a net-zero global economy, November 2021, p. 11

[2] Ibid.

[3] Ibid.

[4] Ibid, p. 12

[5] 2021 Report, The Production Gap: Governments’ planned fossil fuel production remains dangerously out of sync with Paris Agreement limits, available online at

[6] 2019 Report: The Production Gap: The discrepancy between countries’ planned fossil fuel production and global production levels consistent with limiting warming to 1.5°C or 2°C, available online at

[7] International Energy Agency, Net Zero by 2050: A Roadmap for the Global Energy Sector, May 2021

[8] The Grantham Institute, What are Stranded Assets?, available online at

This call for written evidence has now closed.

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