Glasgow Financial Alliance for Net Zero (GFANZ)                                                                                    FSUK0024

Written evidence submitted by the Glasgow Financial Alliance for Net Zero (GFANZ)

Executive Summary

This document responds to the Environmental Audit Committee’s Call for Evidence on “The financial sector and the UK’s net zero transition.” It is provided by the Glasgow Financial Alliance for Net Zero (GFANZ) Secretariat. Transitioning the global economy to net-zero emissions in line with the Paris Commitments will require both public and private sector action. We welcome the UK Environmental Audit Committee's timely review of the role of the UK financial system in the net-zero transition and we look forward to engaging with the Committee to help ensure the entire financial system plays its full part.

Launched in April 2021, under the UK COP Presidency and at President Biden’s Climate Summit, GFANZ is a global coalition of financial institutions committed to accelerating the decarbonization of the global economy and to reaching net-zero emissions by 2050. Convened under the UNFCCC Race to Zero, our members now number more than 500 financial institutions drawn from across the financial system and from over 45 countries. GFANZ is a global initiative, but the UK is well represented with, for example, 9 of the UK’s top 10 banks[1]; 8 of the UK’s top 10 asset managers[2]; and 6 of the UK’s top 10 insurers being members.[3]

GFANZ is working to ensure that financial institutions have the tools they need to deliver on their transition commitments, including by developing a pan-sector framework for net-zero transition planning by financial institutions, with supporting tools; by working to mobilize capital to support transition in emerging markets and developing economies (EM&DEs); by improving public access to data on climate transition; and by calling on governments to make policy to support the net-zero transition. Key milestones for our initiative include:

        October 2021: Publication of our Call to Action which provided policy recommendations to G20 governments and underscored our commitment to working with governments and policymakers to accelerate the net-zero transition.[4]

        November 2021: Publication of an inaugural Progress Report ahead of the UK’s COP Summit, with an overview of our forward work programme.[5]

        June 2022: Publication of our draft framework for net-zero transition planning, with a set of supporting tools;[6] the announcement of a Climate Data Steering Committee to deliver an open source data platform to improve access to climate-related transition data;[7] and the launch of GFANZ’s regional network and Advisory Board in Asia Pacific (APAC).[8]

The contents of this document are organized as follows:

        Section 1: An overview of GFANZ, its objectives, and links to the UN Race to Zero

        Section 2: An overview of the GFANZ work programme and key progress to date


1. An overview of GFANZ, its objectives, and links to the UN Race to Zero

GFANZ is a global coalition of financial institutions convened under the UNFCCC Race to Zero that is committed to accelerating and mainstreaming the decarbonization of the global economy and reaching net-zero emissions by 2050. Today, GFANZ brings together seven financial sector net-zero alliances, which have more than 500 members, into a pan-sector global strategic alliance to address common challenges and elevate best practices across the sector.[9]

The UN Race to Zero is a global campaign rallying non-state actors ― including companies, cities, regions, and financial and educational institutions ― to take rigorous and immediate action to halve global net-zero carbon emissions by 2030 and achieve net zero by 2050. All members are committed to the same overarching goal: reducing emissions across all scopes swiftly and fairly in line with the Paris Agreement, with transparent action plans and robust near-term targets.

The seven financial sector net-zero alliances[10] build upon the UN Race to Zero starting line criteria to establish published, objective commitment criteria reflecting the unique business models of their industries. Within 12 months of joining the UN Race to Zero, firms must explain what actions will be taken toward achieving both interim and longer-term pledges, especially in the short- to medium-term. They must commit to reporting on progress at least annually. As per the updated criteria announced by UN Race to Zero on June 15th 2022,[11] it is also now an explicit requirement for firms to also disclose a transition plan within 12 months of joining.[12] Please refer to Figure 1, below, for an overview of GFANZ’s governance structure.


Figure 1 GFANZ structure[13]

GFANZ does not set membership requirements. That is the domain of the UN Race to Zero in partnership with each of the individual sector-specific alliances that comprise GFANZ.  Guidance and recommendations published by GFANZ are voluntary in nature. However, GFANZ hopes that in the absence of more ambitious public policy and official sector requirements in jurisdictions across the world, its work can help fill the gap and accelerate the role of private finance in supporting the net-zero transition of the global economy.

GFANZ is led by a CEO-level Principals Group drawn from our member institutions. The GFANZ leadership team comprises Mike Bloomberg (Co-Chair), Mark Carney (Co-Chair), Mary Schapiro (Vice Chair), and Nigel Topping (UN High Level Champion).[14] GFANZ also has a Steering Group (comprising senior-level staff representatives of the Principals Group) and an Advisory Panel of technical expert NGOs that advise on GFANZ’s work.[15] Our technical work is delivered through a series of workstreams, drawn from our members and advisors. We also engage with a wider set of stakeholders on our work and provide regular updates to the G20’s Financial Stability Board.

GFANZ members are at various stages in delivering on their net-zero commitments. They are expected, within 12-18 months, to set their initial targets, and thereafter to report on progress annually. Therefore, those members who joined some time ago are already beginning to make these disclosures, while many others who joined more recently are working to set initial targets.

2. An overview of the GFANZ work programme and key progress to date

The diagram in Figure 2 summarizes the GFANZ work programme for 2022, core elements of which are considered in further detail below.

Figure 2 GFANZ 2022 Work Program[16]


Governments and private sector firms around the world have committed to achieving net zero with the goal of limiting global warming to 1.5 degrees C. As of June 2022, over 130 countries, representing 90% of global GDP, have made net-zero commitments.[17] To fulfill these commitments and drastically reduce greenhouse gas (GHG) emissions, real-economy firms, with the support of governments and the financial sector, must decarbonize their business activities and scale climate solutions to replace GHG-emitting assets, products, and services. According to a recent analysis by BloombergNEF (BNEF), this will require an unprecedented increase in financing, with global investment in energy infrastructure alone requiring an additional $3 trillion annually over the next decade, including a tripling of current annual clean-energy investment.[18] GFANZ was founded because to finance investment of this scale requires the mobilization of the entire financial system.

Financial institutions support the real-economy by allocating capital and providing related services to firms to enable their current business activities and finance forward-looking strategies. To support an orderly transition to net zero, GFANZ believes that financial institutions should redirect that capital and supporting products and services, to encourage ambitious and credible net-zero strategies and emissions reductions by their clients and portfolio companies. GFANZ recommends financial institutions support the whole-economy net-zero transition through four key approaches:

(i) financing or enabling the development and scaling of climate solutions to replace high emitting technologies, activities, or services;

(ii) financing or enabling companies that are already aligned to a 1.5 degrees C pathway;

(iii) financing or enabling the transition of real-economy firms according to transparent and robust net-zero transition plans in line with 1.5 degrees C-aligned sectoral pathways; and

(iv) financing or enabling the accelerated, managed phaseout of high-emitting physical assets.

To translate their net-zero commitments into action, financial institutions should develop a “net-zero transition plan” that articulates their transition goals, the specific actions they will take, and the accountability mechanisms they will implement to ensure their plans are credible. Net-zero transition plans are foundational to operationalizing commitments and demonstrating the credibility of a financial institution’s net-zero pledge. Financial institutions’ transition plans should finance or enable activities that lead to reductions in emissions and support the global economy’s transition to net zero.

On June 15th GFANZ published for public consultation a global framework for financial institutions’ Net-Zero Transition Plans (Recommendations and Guidance on Financial Institution Net-Zero Transition Plans) alongside a number of supporting resources.[19]  Collectively, the five documents published comprise a set of related tools, frameworks, and other resources to support transition planning across the financial sector with the goal of enabling and financing the real-economy transition to net zero:

    1. Recommendations and Guidance on Financial Institution Net-zero Transition Plans.

GFANZ issued for public consultation voluntary recommendations and guidance for financial institutions to develop net-zero transition plans. The proposed framework is intended to be globally applicable and relevant to all types of financial institutions. GFANZ believes that a credible net-zero transition plan is one that is actionable, focused on near-term action, grounded in medium and long-term milestones, and aligned with a carbon budget for limiting warming to 1.5 degrees C with low or no overshoot according to the latest findings of the Intergovernmental Panel on Climate Change (IPCC).

GFANZ recommends a financial institution’s net-zero transition plan address 10 core components, grouped into five themes: Foundations, Implementation Strategy, Engagement Strategy, Metrics and Targets, and Governance. The report provides recommendations, guidance, and illustrative examples for each component. The recommendations and guidance on financial institution net-zero transition plans have been published for consultation to gather feedback from stakeholders across the financial system and civil society, before final voluntary recommendations and guidance are published later in 2022. GFANZ invites all interested parties to read the consultation draft and participate in the survey, open for six weeks from June 15, 2022.

    1. Guidance on Use of Sectoral Pathways for Financial Institutions.

This guidance supports financial institutions in using sectoral pathways as part of their transition planning and implementation efforts. It includes a framework for comparing and assessing sectoral pathways that provides users with a consistent set of questions to consider for understanding the scope and ambition of the pathway, the underlying assumptions that explain how the pathway is achieved, and the credibility of the pathway. Collectively, this framework helps pathway users understand how pathways differ and evaluate their suitability for their transition planning process.

    1. Introductory note on Expectations for Real-Economy Transition Plans.

To finance and enable the transition to net zero, financial institutions will have to work with and support clients and portfolio companies as they develop and implement their own transition plans. This report clarifies what information the financial sector finds relevant from real-economy firms’ transition plans and progress reporting. It provides initial insights into a suggested transition plan framework, which is designed to align with the suggested framework for financial institutions’ own net-zero transition plans. Clear transition plans and implementation progress from real-economy firms will enable financial institutions to evaluate whether their financing decisions and other services are in line with their transition objectives.

    1. Report on the Managed Phaseout of High-emitting Assets.

Financing or enabling the managed phaseout of high-emitting assets — i.e., through their early retirement — is a key approach financial institutions can take to support the real-economy net-zero transition. This paper sets out Managed Phaseout as a net-zero aligned strategy for an asset, or as part of a company’s strategy, in support of an orderly and just transition. Importantly, this approach supports a role for financial institutions to responsibly steward high-emitting assets out of the economy over a defined timeline consistent with the net-zero transition. This can avoid potential unintended consequences of financial institutions simply withdrawing finance from activities that may be vital for the economy in the short term, only to be financed by those with less climate ambition.

This Paper provides a preliminary and high-level approach to support the identification of assets where Managed Phaseout could be appropriate, offers an initial overview of potential financial mechanisms that could support Managed Phaseout, and includes initial guidance on the features of a credible asset-level Phaseout plan. It sets out nine actions for GFANZ to pursue, in collaboration with partners, to build on these initial frameworks and help support Managed Phaseout as a credible net zero-aligned strategy to support the decarbonization of the global economy.

    1. Concept note on Portfolio Alignment Measurement.

Portfolio alignment metrics provide forward looking ways to evaluate the alignment of investment, lending, and underwriting activities with net-zero objectives. As such, they are useful in both implementing transition plans and monitoring ambition and progress towards net zero objectives. However, portfolio alignment metrics are relatively new and thus financial institutions face several challenges in using them.

To address these barriers to adoption, the GFANZ Workstream on Portfolio Alignment Measurement will recommend enhancements to portfolio alignment methodologies in a report to be released in advance of COP27. The report will seek to refine best practice guidance and drive enhancement, convergence on emerging methodological best practices, and adoption of portfolio alignment metrics. Ahead of then, the workstream has published a Concept Note that outlines the workstream’s plan and shares an initial view on potential enhancements to be made this year. It was drafted with input from more than 30 financial industry practitioners who responded to public calls for feedback.

Looking ahead

GFANZ’s release on June 15th 2022 represents the first step toward providing tools and guidance to support the financial sector’s role in financing and enabling the transition of the global economy to net zero. Ahead of COP27, GFANZ will publish:

        Final Recommendations and Guidance on Net-zero Transition Plans for the Financial Sector.

        Expectations for Real-economy Transition Plans.

        Sector-specific briefs on the oil and gas, steel, and aviation sectors, bringing together detail on the pathways for those sectors with relevant guidance on transition plan components for companies within them.

        Guidance on portfolio alignment measurement, providing enhancements to the 2021 Portfolio Alignment Team report.

        A private sector statement on “country platforms” that shares a set of considerations that government leaders can incorporate into the design of these efforts to encourage greater private capital flows to EM&DEs.

        Research on the flows of private sector capital to support the net-zero transition in EM&DEs.

        An update of GFANZ’s view on the public policy actions needed to enable the net-zero transition.

In addition to publishing these resources, GFANZ is working to support the transition in practical ways across the sector including by:

        Building out our global presence and member connectivity by launching a network in Asia Pacific, and preparing to launch similar networks in Africa and Latin America, to support capacity-building of financial institutions in parts of the world currently underrepresented in GFANZ membership.[20]

        Executing on an ambitious workplan around mobilizing capital to EM&DEs, including establishing tailored country solutions[21] and supporting efforts of major economies to establish country platforms,[22] and supporting various market-making initiatives to accelerate the net-zero alignment of major EM&DEs.

        Helping lead the recently announced Climate Data Steering Committee which will develop recommendations on how to capture and build centralized, comprehensive, open (i.e. publicly available) data to accelerate the net-zero transition. This work will bring transparency and accountability to company net-zero commitments and improve the capabilities of financial institutions to develop and execute on net-zero transition plans.

        Engaging with governments and international bodies to encourage the adoption of more ambitious climate policy that will enable the financial sector and real-economy to more rapidly transition. Our engagement focuses in particular on net-zero transition planning, and related tools, and efforts to support capital mobilization to EM&DEs.


June 2022


[1] Source: BankFocus, measured in 2021 bank assets.

[2] Source: Capital IQ, measured as 2021 assets under management.

[3] Source: Capital IQ, measured in 2021 net premiums earned. 

[4] The Call to Action can be found here.

[5] The Progress Report can be found here.

[6] These publications can be found here.

[7] The relevant press release can be found here.

[8] The relevant press release can be found here.

[9] Refer to for further detail.

[10] These are Net Zero Asset Managers initiative (NZAM); Net-Zero Banking Alliance (NZBA); Net-Zero Asset Owners Alliance (NZAOA); Paris Aligned Investment Initiative (PAII); Net-Zero Insurance Alliance (NZIA); Net Zero Financial Service Providers Alliance (NZFSPA); and Net Zero Investment Consultants Initiative (NZICI).

[11] Reference latest RTZ criteria here.

[12] Existing members will need to comply with these new requirements as of 15 June 2023.

[13] GFANZ will periodically report to the Financial Stability Board (FSB) on progress.

[14] Refer to an overview of GFANZ’s leadership here.

[15] The list of Advisory Panel members can be found here.

[16] GFANZ uses the term “orderly transition” to refer to a net-zero transition in which both private sector action and public policy changes are early and ambitious, thereby limiting economic disruption related to the transition (e.g., mismatch between renewable energy supply and energy demand). For reference, the Network for Greening the Financial System (NGFS), which develops climate scenarios used by regulators and others, defines “orderly scenarios” as those with “early, ambitious action to a net zero CO2 emissions economy,” as opposed to disorderly scenarios (with “action that is late, disruptive, sudden and / or unanticipated”). In an orderly transition, both physical climate risks and transition risks are minimized relative to disorderly transitions or scenarios where planned emissions reductions are not achieved.

[17] Refer to Net Zero Tracker. Overview of the 2,000 largest publicly traded companies in the world by revenue, June 2022.

[18] Refer to BNEF’s New Energy Outlook 2021.

[19] Reference press release here.

[20] Current GFANZ membership split by region as of June 2022 is approximated as follows: Europe 60%, North America 22%, Asia Pacific 13%, and the remainder in Latin America and Caribbean, Africa, and Middle East.

[21] Includes Climate Finance Leadership Initiative (CFLI) Country Pilots in India and Colombia.

[22] Includes Just Energy Transition Partnerships.