This report distills existing guidance to bring clarity and help companies in the real economy develop credible transition plans. Additionally, the report brings much-needed consistency on metrics and data points required by global financial institutions to evaluate the progress and credibility of companies’ net-zero transition plans.
September 22, 2022 – Today, the Glasgow Financial Alliance for Net Zero, the world’s largest coalition of financial institutions committed to transitioning the global economy to net-zero greenhouse gas (GHG) emissions, released a new report on transition plan disclosure for real-economy companies. The Expectations for Real-economy Transition Plans report articulates the critical components needed to disclose a rigorous transition strategy by companies large and small, so that financial institutions can assess those plans and support these companies as they work to transition their operations toward a net-zero global economy.
The report synthesizes the relevant components, and associated guidance, from existing transition plan disclosure frameworks1 to help real-economy companies navigate disclosure requests from financial institutions. This guidance from GFANZ aims to bring much-needed consistency, clarity, and a global economy-wide view on information and metrics financial institutions require to assess the credibility of plans. It is estimated that just 30% of companies disclosing climate-related data to CDP are developing a low-carbon transition plan and only 1% of these companies reported all key indicators associated with a credible transition plan.2
Net-zero transition plans are essential instruments to deliver real-world emissions reductions in line with achieving global net zero by 2050 and limiting warming to 1.5 degrees Celsius. Currently the lack of consistent frameworks contributes to the barriers businesses face as they seek to accelerate the net-zero transition and adjust their business strategy with credible, science-based targets. The GFANZ report aims to increase the number and credibility of transition plans disclosed by real-economy companies and enable financial institutions to support the development and implementation of those plans.
Real-economy companies can use the transition plan blueprint within the report to understand the information and data that global financial institutions will need to evaluate the credibility of their strategies and measure their progress towards net zero in line with pathways for limiting warming to 1.5 degrees C. Similarly, as governments, regulators, and standard-setters look to develop guidelines and build international consensus on transition planning, the report aims to support their efforts by promoting convergence on real-economy transition planning.
Mary Schapiro, GFANZ, Vice Chair – “A global net-zero economy transition requires financial institutions and real-economy firms to work from a common set of expectations. Ensuring companies know what financial institutions deem credible underpins the essential work driving emissions reductions. GFANZ is providing the blueprint for the real-economy to transform net-zero commitments into a business-aligned decarbonization strategy.”
David Schwimmer, LSEG, CEO– “Many companies are pledging to cut emissions, but very few have an actual transition plan to deliver on those pledges. And companies need much clearer guidance to do that. This new guidance from GFANZ sets out the practical steps companies can take. LSEG is proud to be part of this GFANZ programme, bringing much needed clarity on a critical issue.”
Thomas Buberl, AXA, CEO– “The financial sector is a connector across industries. Together with real-economy companies, we must work together to strengthen our common ambition for climate action and to progress towards net zero. This new guidance will ensure we’re working together every step of the way.”
Alison Rose, Natwest, CEO– “The financial sector has an incredible opportunity to lead and make bold choices to truly create a tangible impact on the pathway to net zero. Credible real-economy transition plans are a key component of this endeavor — and with them, we can create action extending beyond finance, leading to positive, long-lasting and widespread results that will protect our planet’s future.”
The report is the most recent in a series of resources provided by GFANZ meant to support convergence in the development of global regulatory framework. In June, GFANZ identified four essential approaches for financial institutions to support the real-economy transition to net-zero emissions; they include:
- Financing the development and scaling of net-zero technologies or services to replace high-emitting sources;
- Increasing support for companies that are already aligned to a 1.5 degrees Celsius pathway;
- Enabling high and low-emitting real-economy companies to align business activity consistent with a 1.5 degrees C pathway for their sector; and
- Accelerating managed phaseout of high-emitting assets through early retirement
This latest report also serves as the foundation for a forthcoming series of sector briefs for high-emitting and hard-to-abate sectors – aviation, oil & gas, and steel. The three sector briefs, to be soon released, will provide greater detail for these industries in their path to decarbonization.
1Initiatives include Task Force on Climate-Related Financial Disclosures (TCFD), International Sustainability Standards Board (ISSB), CDP, Assessing Low Carbon Transition (ACT), Climate Action 100+ (CA100+), Transition Pathway Initiative (TPI), and the Science Based Targets initiative (SBTi).
2CDP analysis, March 2022
The Glasgow Financial Alliance for Net Zero (GFANZ) is a practitioner-led, global coalition of financial sector institutions and their sector-specific alliances working together to accelerate the world’s transition to net-zero greenhouse gas emissions by 2050 and achieve the objective of the Paris Agreement to limit global warming to no more than 1.5 degrees C. GFANZ has united over 500 member firms from across the financial sector, including banks, insurers, asset owners, asset managers, financial service providers and investment consultants, spanning 45 countries.
Further details can be found on https://www.gfanzero.com.