(Bloomberg) -- Banks and asset managers representing 40% of the world’s financial assets have now pledged to meet the goals set out in the Paris climate agreement, as an alliance championed by former central banker Mark Carney swells under the gaze of a world increasingly alarmed by planetary warming.
More than 450 firms representing $130 trillion of assets now belong to the Glasgow Financial Alliance for Net Zero, almost double the roughly $70 trillion at the time of its April launch, according to a progress report published by the coalition Wednesday. Signatories must commit to use science-based guidelines to reach net zero carbon emissions by mid-century, and to provide 2030 interim goals.
For Carney, who chairs GFANZ, the announcement marks a milestone moment after he managed to get some of the world’s biggest financial firms to sign up at the eleventh hour. U.K. Chancellor Rishi Sunak called the commitments “historic” in a separate statement. He also used the opportunity to announce plans to make Britain, which is hosting the COP26 climate summit, “the world’s first net zero aligned financial center.”
Despite the huge headline number, skeptics question the underlying terms of the commitments. According to French nonprofit Reclaim Finance, none of the sub-alliances that make up GFANZ require signatories to stop financing fossil-fuel expansion. And since the 2015 Paris accord was struck, global banks have funneled $4 trillion into oil, gas and coal, with almost half a trillion of that allocated this year alone, according to Bloomberg data.
United Nations Secretary-General Antonio Guterres said in a recent speech that mankind’s “addiction to fossil fuels is pushing humanity to the brink.” He also said that “there is a deficit of credibility and a surplus of confusion over emissions reductions and net zero targets, with different meanings and different metrics.”
For that reason, Guterres said he plans to establish an expert panel “to propose clear standards to measure and analyze net zero commitments from non-state actors.”
The GFANZ progress report also outlines work underway to define net-zero pathways for carbon-intensive sector, alignment on what constitutes suitable transition plans for banks and corporates and a sector-wide plan to deploy capital needed for decarbonisation in emerging markets.
Carney said in a recent interview that he’ll be “ruthlessly, relentlessly” monitoring signatories to make sure they live up to their promises. The 56-year-old will be center stage on Wednesday as the focus of COP26 turns to the finance industry and the role it needs to play in fighting climate change.
GFANZ was created in April. Convened by the United Nations, the alliance comprises six groups spanning all corners of the financial industry. Michael R. Bloomberg, the owner and founder of Bloomberg News parent Bloomberg LP, is co-chair of GFANZ.
For the British government, COP has been an opportunity for the country to try to reinvent itself as a climate leader in a post-Brexit world. Sunak says the goal of becoming a net zero aligned financial center will entail a new rule book to ensure that companies follow well-defined standards when reporting their transition plans.
“To guard against greenwashing, a science-based ‘gold standard’ for transition plans will be drawn up by a new Transition Plan Taskforce, composed of industry and academic leaders, regulators, and civil society groups,” Sunak said in the statement.
In its capacity as host of the COP26 talks, Sunak also said that the U.K. has convened over 30 advanced and developing countries representing over 70% of global GDP to back the creation of new global climate reporting standards by the IFRS Foundation “to give investors the information they need to fund net zero.”
“This is critical if we are going to rewire the financial system to prevent climate breakdown,” said Heather McKay, policy adviser at climate think tank E3G. “I hope that other countries follow suit.”
(Adds details from GFANZ report throughout.)
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