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GFANZ Launches Consultation to Enhance Investment Definitions in Transition Finance

In a forward-looking move, the Glasgow Financial Alliance for Net Zero (GFANZ) has initiated a dynamic consultation process to meticulously refine its transition finance definitions and the evolution of decarbonization contribution methodologies. This groundbreaking development, announced earlier this week, signals GFANZ's unwavering commitment to establishing comprehensive and universally applicable reports, transcending market boundaries, and spanning diverse industry sectors.

The primary objective of this visionary consultation endeavor is to empower financial institutions with the tools necessary to assess their exposure to climate risk autonomously and to identify lucrative avenues for investment, all while playing an integral role in the tangible and pragmatic decarbonization of the real economy.

The public consultation window will remain open until November 2nd, inviting active participation from stakeholders representing a broad spectrum of interests. Notably, the culmination of this collective effort will yield a comprehensive report slated for release at the upcoming COP28 Climate Summit, ushering in a new era of climate finance transparency and coherence.

The previous year, a pivotal milestone for GFANZ, saw the alliance unveil its visionary quartet of strategies designed to underpin the financing of an entire economic shift towards net-zero emissions. These strategies encompass the development and proliferation of climate-focused solutions, the identification of assets and enterprises firmly aligned with the rigorous 1.5-degree Celsius pathway, the inclusion of assets and companies irrevocably committed to aligning with 1.5-degree tracks, and the expedited and expertly managed phase-out of high-emission physical assets.

Within the purview of this consultation, GFANZ beckons for feedback on a principles-based approach meticulously designed to segment portfolios, expertly categorizing them across the four strategic pillars. Additionally, it spotlights an array of intriguing and viable methods, offering stakeholders ample room for consideration and contribution to the ongoing evolution of sustainable finance paradigms.

The consultation introduces the concept of expected emissions reductions (EER), which is applicable across the four strategies but employs "distinct approaches for each," which will allow firms to quantify the "emissions return" of their transition finance activities, it said.

"To achieve the largest and most rapid reduction in emissions possible, transition finance must be mobilized urgently and at scale," said GFANZ co-chair and UN special envoy on climate action and finance Mark Carney. "Trillions of dollars are required to bring emissions down, and private finance will need to play a central role. We need to be able to track the impact by measuring the expected decarbonization contribution of financing.

"This consultation links decarbonization contribution methodologies to the GFANZ financing strategies as a proposed approach to measuring the impact of transition finance over time. "We strongly encourage all stakeholders to take part in the consultation."

Michael Bloomberg, GFANZ co-chair and UN special envoy on climate ambition and solutions, added that the more accurate and transparent data made available to the market, the more capital "will flow to climate projects, reducing emissions, improving public health and growing the economy."

Mary Schapiro, GFANZ vice chair, added: "We encourage everyone who is committed to the net-zero transition to provide feedback, and we welcome insights from the public and private sectors, civil society, and academia to help us address the really difficult issues that are part of the net-zero transition."


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