This consultation report outlines how portfolio alignment metrics are used today and seeks feedback on guidance and enhancements to critical inputs for measuring portfolio alignment. Welcoming the TCFD publications today, the Financial Stability Board said the framework had become a widely supported basis for climate-related reporting, most recently through jurisdictional initaitives to make such disclosures mandatory or promote voluntary implementation, as well as through the IFRS Foundations work to develop a baseline global sustainability reporting standard. Thanks to all 50+ organizations who engaged with us to get the report to this stage, as well as the technical leadership of Anja Ludzuweit, CFA, and with the support of Edward Mason and David Blood. On the contrary, the report explains that many firms do not want to limit themselves to a single metric, but prefer instead a dashboard approach which makes use of a variety of backward- and forward-looking metrics. GFANZ itself finalised its work on the key area of "Portfolio Alignment Management", "supporting the development and effective implementation of Portfolio alignment metrics for financial institutions and driving convergence in the way portfolio alignment is measured and disclosed. Clear guidance can help to advance best practices on portfolio alignment methods and the range of portfolio alignment metrics used. Banks, asset managers, asset owners, and insurers want PAMs because they can show how in-sync their portfolios are with global climate goals. 2022 CONCEPT NOTE ON PORTFOLIO ALIGNMENT MEASUREMENT 2 Acknowledgements This report was developed by the GFANZ workstream on Portfolio Alignment Measurement with input from the GFANZ Principals Group, Steering Group, and Advisory Panel. The final PAT report and TCFD recommendation incorporate some key changes in response to consultation feedback. allowance for whether such an alignment would be in the financial best interests of the company.14 The nature of our legislative process produces carve outs, exceptions, delays, or exemptions, any of which . Michael R. Bloomberg, UN Special Envoy on Climate Ambition and Solutions, and Mark Carney, UN Special Envoy for Climate Action and Finance, serve as GFANZ Co-Chairs, and Mary Schapiro serves as the Vice Chair and Head of the Secretariat. These publications aim to support financial institutions in developing and implementing credible, high-ambition strategies for achieving net zero. (GFANZ), a Carney-led coalition, "as the natural place to take guidance on portfolio alignment metrics . The report proposes and seeks guidance on portfolio alignment use . For some firms it would be risky to change their metrics to align with GFANZs answers to the key design judgments. Masons colleague, David Blood, senior partner at Generation, was head of the PAT. crosscutting issues that will accelerate the alignment of financing activities with . Given that GFANZ counts the world's three largest fossil fuel financiers JPMorgan Chase, Citi and Bank of America among its members, achieving a 50% reduction in seven years almost certainly requires retirement or active environmental management of existing carbon-intensive investments, and definitely a stop to new investments in such assets. 3 min read. GFANZ 2022 Progress Report. Source: GFANZ . Members of the, This document is a concept note produced by a workstream of the Glasgow Financial Alliance for Net Zero (, focused on portfolio alignment metrics (including barriers to adoption, potential enhancements, and calling on financial, sector practitioners and metric providers to share use cases) (the , ). Mary Schapiro, Vice Chair of GFANZ, said Growing global scrutiny of transition plans makes the need for business action on climate ever more urgent, If financial institutions are to deploy the capital required to usher in the net-zero transition, they need a way to measure whether their financing activities align to their ambition.. interested party or its advisers in connection with this Note. Thanks to all 50+ organizations who engaged with us to get the report to this stage, as well as the technical leadership of Anja Ludzuweit, CFA, and with the support of Edward Mason and David Blood. Portfolio > Asset Managers. . Carbon Tracker Expectations of GFANZ. There is currently a proliferation of PAMs being used, which impedes on the financial sector's ability to accurately assess the progress and risk of their portfolios in the context . The Portfolio Alignment Team (PAT) issued a report in 2020 titled Measuring Portfolio Alignment: Assessing the Position of Companies and Portfolios on the Path to Net Zero. Background on GFANZ and the Report. The measures announced are a first step towards phasing out the oil and gas sector, but will not be enough to allow Crdit Agricole to fully contribute to the objective of limiting global . Now open for public comment, the GFANZ Portfolio Alignment Measurement Report provides additional guidance for financial institutions on implementing and selecting portfolio alignment metrics. New regional network with central office in Singapore will support expansion of net-zero finance in Asia-Pacific and help accelerate the regions transition to a net-zero economy. National leaders in Africa and other parts of the developing world are sure to press GFANZ in Sharm El Sheikh to support specific climate-protection projects in their respective countries. GFANZ calls for portfolio alignment feedback To access this article please sign-in below or register for a free one-month trial. After all, a single type of PAM used industry-wide would make it easier to assess the financial systems overall alignment with net-zero goals. Third-party vendors have also built specialist products to meet the growing demand for PAMs. Previous guidance documents published by GFANZ. The goal is to bring together the best thinking from across the system to accelerate progress . Thanks to all 50+ organizations who engaged with us to get the report to this stage, as . Still, while it does not favor one metric over another GFANZ does highlight the pros and cons of each PAM, perhaps to nudge institutions towards what the evidence suggests are the higher-quality and more decision-useful versions. (Bloomberg) -- Vanguard Group Inc. is walking out of the world's largest climate-finance alliance, marking the coalition's biggest defection to date as . Further guidance on measuring portfolio alignment and recent recommendations made by the launch on climate data steering committee and the Climate Data Steering Committee on the launch of Net Zero Data Public Utility (NZDPU). 2 min read. in support of a net-zero climate transition. GFANZ unveils enhancements to measuring Net-Zero portfolio alignment for financial institutions Now open for public comment, the GFANZ Portfolio Alignment Measurement Report provides additional guidance for financial institutions on implementing and selecting portfolio alignment metrics. Thanks to all 50+ organizations who engaged with us to get the report to this stage, as well as the technical leadership of Anja Ludzuweit, CFA, and with the support of Edward Mason and David Blood. Sign up to receive our newsletter and stay updated on the latest GFANZ news and events. The report aims to drive adoption of portfolio alignment metrics and meaningful convergence . David Blood, head of the portfolio alignment team at the COP26 private finance hub and co-founder of Generation Investment Management argues that portfolio alignment metrics will be a crucial catalyst of the transition to net zero. We deep dive into what climate metrics financial practitioners . officers, employees, agents or advisers in relation to the adequacy, accuracy, completeness or reasonableness of this Note, or of any other information (whether written or oral), notice or document supplied or otherwise made available to any. Still, financial institutions want to plot a course to its coolest fringes. The report aims to drive adoption of portfolio alignment metrics and meaningful convergence . For the avoidance of doubt, nothing express. GFANZ members commit to $130tn for Paris alignment Mark Carney, UN special envoy on climate, announcedthat members of the Glasgow Financial Alliance for Net Zero (GFANZ) have committed to align their portfolios with the pathway to the Paris Agreement targets using "gold standard" procedures and metrics, with balance sheets totalling over $130tn. Green Finance Briefing: GFANZ moves a step ahead on net zero portfolio alignment Financial services need to decarbonize, but the banks and FIs looking to start this journey or deliver on their net-zero commitments are looking at a tricky road ahead. GFANZs big challenge, therefore, is to find ways to cajole member institutions into embracing its guidance while minimize this kind of PAM transition risk. One way to address the first half of this problem would be to encourage better disclosure around PAMs, so that financial institutions and metric providers have to explain their choices against the nine key design judgments. This would help identify flawed PAMs and give stakeholders the evidence they need to push for changes. 685 1784 92. GFANZ will be at COP15, the 2022 UN Biodiversity Conference taking place in Montreal, Canada. How should alignment be expressed as a metric? Lombard Odier convened a NCIA and Circular Bioeconomy Alliance event on the subject of "Investing in Nature at Scale". Following the public comment period, GFANZ will release a final report prior to COP27 in Egypt's Sharm el-Sheikh this autumn. GFANZ proudly announced its members were already aligning their portfolios with 1.5C; 90 of its founding institutions had already set short-term climate targets, including 29 asset owners committed to reducing portfolio emissions by 25-30% by 2025. Out of a desire to quickly re-align its portfolio with 1.5C, the fund may choose to rapidly divest from those companies with high Scope 3 emissions, catalyzing a fire-sale that ripples through financial markets. . GFANZ is seeking feedback on the guidance and enhancements to critical inputs for measuring portfolio alignment by 12 September. However, it wasnt very long ago that the Task Force on Climate-related Financial Disclosures (TCFD) the premier framework for climate risk reporting appeared tofavor the widespread use of ITRsover other kinds of metric. . Advisory Panel of 20 independent experts from around the world, and the 7 NGOs that convene the sub-sector alliances of GFANZ. GFANZs practitioner-led guidance has been developed based on input from net-zero stakeholders, including financial institutions, financial data providers, and civil society. The information in this Note, which does not purport to be comprehensive, nor render any form of legal, tax, investment. Published on: 12 Aug, 2022, 3:56 am. Is GFANZ Greenwashing? GFANZ is a coalition of financial institutions which have committed to aid the transition the global economy to net - zero greenhouse gas (GHG) emissions. The Glasgow Financial Alliance for Net Zero (GFANZ), the worlds largest coalition of financial institutions committed to transitioning the global economy to net-zero greenhouse gas (GHG) emissions, proposed new and enhanced guidance on measuring the alignment of financial institutions investment, lending, and underwriting activities with net-zero commitments. 5 And the first targets have also been published by Net Zero Banking . GFANZ Technical Lead - Portfolio Alignment Measurement (Contract) Bloomberg LP New York, NY 3 weeks ago Be among the first 25 applicants The RTZ announced an update to its membership criteria.The RTZ is a coalition of over 10,000 businesses, financial institutions, and government bodies worldwide that was . The report aims to drive adoption of portfolio alignment metrics and meaningful convergence . Certain stakeholders pushed back against this in a subsequent consultation. This framework consists of nine key design judgments specific questions that financial institutions and metric providers should consider when building PAMs and best practice recommendations for answering each one. It provides useful technical hints to help asset owners think how to measure investment-related climate neutrality, and will reduce the risks of greenwashing associated with loosely defined ITR models.. 4 days ago 9 min read. The workstream was supported, by the GFANZ Secretariat. The guidance itself is organized around a conceptual framework established by the Portfolio Alignment Team, a group of climate finance professionals who published reports on designing effective PAMs in 2020 and 2021. The draft Glasgow Financial Alliance for Net Zero (GFANZ) Portfolio Alignment Measurement report is out. "To measure portfolio alignment, financial practitioners should consider nine key decisions, the key design judgements," said Anja Ludzuweit, executive director of portfolio alignment measurement for GFANZ. This report details the progress GFANZ has made in 2022 under our program of work to support financial institutions in operationalizing their net-zero commitments, accelerate capital mobilization to EM&DEs, and advocate for credible policies and standards to enable net-zero transition across the globe. GFANZ's proposed framework consists of three "conceptual steps": translating net zero-aligned and scenario-based carbon budgets into benchmarks, assessing company-level alignment against such benchmarks based on cumulative emissions, and aggregating company-level alignment at the portfolio level. By Blake Goud. We have a singular goal to maximize their long-term returns and give them the best chance for investment success as . MSCI and Moodys are two major players in this space. 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How do you aggregate counterparty-level metrics into a portfolio-level score. This coalition now includes over 550 financial institutions committed to the goal of net zero greenhouse gas (GHG) emissions by 2050, in support . On August 2022, GFANZ issued a guidance document for consultation with the aim to enhance, converge, and adopt international best practices for portfolio alignment metrics (PAMs). This could be addressed with better guidance on portfolio alignment metrics, as contained in a recent Glasgow Financial Alliance for Net Zero (GFANZ) report. However, promoting the whole gamut of PAMs may not best serve the overarching mission of the alliance. The recommendation from the TCFD, for example, no longer states that investors should incorporate forward-looking alignment metrics into their target-setting frameworks and management processes. GFANZ has marked a path to improving PAMs that may require some financial institutions and metrics vendors to go back to the drawing board when it comes to their own portfolio tooling. Investors can use Implied Temperature Rise to set decarbonization targets and support engagement on climate risk. The Glasgow Financial Alliance for Net Zero (GFANZ) is a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy. Press Release. It all sounds good in theory, but in practice, the whole endeavor is tremendously complicated. NZIA members have committed to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas (GHG) emissions by 2050, consistent with a maximum temperature rise of 1.5C above pre-industrial levels by 2100, in order to contribute to the implementation of the Paris Agreement on Climate Change. 11 August 2022 Press Release We call on GFANZ to raise its level of ambition through the following actions: GFANZ members have signed up to the ambitious commitments of their respective sector-specific alliances and are not, automatically expected to adopt the principles and frameworks communicated within this report, although we expect all. On 8 August, the chairs of the Glasgow Financial Alliance for Net Zero (Gfanz) - Mark Carney, Michael Bloomberg and Mary Schapiro - released a statement welcoming the UN Race to Zero's new minimum criteria requiring associated members to get out of all unabated fossil fuels. The problem is that the evolution of these tools has outpaced efforts to organize, standardize, and validate them. The report aims to drive adoption of portfolio alignment metrics and meaningful convergence . The consultation report's proposed enhancements aim to address current gaps and accelerate progress toward the wider adoption of portfolio alignment metrics among financial institutions . Mark Carney delivers the opening keynote at COP27 Finance Day, discussing how private sector finance will be essential to deliver the trillions of dollars needed to limit global warming to 1.5 degrees. As the IFRS Foundation advances its work, there is an important continuing role for the TCFD in monitoring and reporting on take-up of its recommendations in the period until a global baseline standard is agreed and the implementation of that standard across jurisdictions begins to be monitored, it said. Together, they work to accelerate the world's transition to . Today GFANZ includes over 450 financial institutions representing assets of more than $130 trillion across 45 countries. This discrepancy, if publicly disclosed, would expose the fund manager to accusations of greenwashing. Accompanying the TCFDs publications today is the final report from the Portfolio Alignment Team (PAT), which was established by Carney in 2020 to catalyse progress in the analysis and use of portfolio alignment metrics. For instance, the report notes that benchmark divergence metrics are [c]omplex to use and interpret, are not meaningful to aggregate at the portfolio level, and that their decision-usefulness is highly dependent on an appropriate level of scenario granularity by sector and geography. This suggests its a flawed metric for conducting the kind of portfolio-level analysis GFANZ members are keen on. Download the report (updated as of 9 November 2022). It continues to encourage Scope 3 emission disclosures, but says this is subject to a materiality assessment. Flawed PAMs may lead financial institutions to inadvertently increase their exposure to climate transition risk, for example by investing in carbon-intensive companies that arent taking appropriate steps to lower their emissions. Portfolio alignment tools have an important role to play in the target-setting process, in that they can provide input on what needs to be done in order to align a portfolio with the goals of the Paris Agreement in the intermediate term (e.g., on the way to net-zero), given its unique economic composition. 11 GFANZ, Our Progress . In this instance, GFANZ is reflecting the will of its signatories. Author: Portfolio Alignment Team Industry Group: Financial. Alienate them by imposing unwanted standards and the alliance could break apart. Measuring Portfolio Alignment: Enhancement, Convergence, and Adoption aims to offer guidance on multiple technical aspects, structured around 9 'key judgments'. Review the list of activities GFANZ will be participating in at COP15 with the latest announcements, speeches, and events as they happen. This report provided a critical assessment of the strengths and trade-offs of the options available to measure the alignment of financial portfolios with climate goals. For example, on the first judgment what type of benchmark should be built? GFANZ proposes that firms use a single-scenario benchmark built using a fair-share carbon budget approach where possible, and a convergence-based approach if not. In order to ameliorate PAM transition risk, meanwhile, institutions could be advised to publish standardized, backward-looking metrics alongside their PAMs that adhere to a simple, standardized methodology. For its part, the TCFD today also released new guidance for companies to disclose their plans for a net-zero transition in line with the Paris Agreement, including disclosure of seven categories of cross-industry metrics like Scope 1, 2 and 3 greenhouse gas (GHG) emissions. Every company, bank, insurer, and investor will need to adjust their business models, develop credible plans for the transition to a low-carbon, climate-resilient future, and then implement those plans. But firms seem to be moving in this direction anyway, given their professed preference for climate dashboards that include multiple PAMs and backward-looking metrics. As a result, there now exists an exotic menagerie of PAMs addressing various use cases and built using all kinds of forward-looking methodologies. In a statement announcing the withdrawal, Vanguard . . One year ago at COP26 in Glasgow, ex-governor of the Bank of England Mark Carney announced that more than $130trn (109.54trn) of private capital had been committed to net zero under his landmark initiative, the Glasgow Financial Alliance for Net Zero ().This was a strong sign that financial institutions were ready to take responsibility for their impact on climate change, and GFANZ has only . Implied Temperature Rise from MSCI ESG Research is an intuitive, forward-looking metric, expressed in degrees Celsius, designed to show the temperature alignment of companies, portfolios and funds with global temperature goals. Registered Office: 1 Kentish Buildings, 125 Borough High Street, London SE1 1NP, Asset Class Report - Equities (December 2022), Country Report - Pensions in the Nordic Region (December 2022), in 2020 to catalyse progress in the analysis and use of portfolio alignment metrics, IFRS Foundations work to develop a baseline global sustainability reporting standard, Glasgow Financial Alliance for Net-Zero (GFANZ), Task Force on Climate-Related Financial Disclosures, Lombard Odier challenges TPI, 2DII responses to TCFD metrics consult, UK asset owners warn TCFD about portfolio alignment proposals, UK reveals plan for economy-wide climate impact reporting regime, Border to Coast adds 2.2bn to second private markets programme, Church Commissioners to vote against companies failing on humans rights, Migros Pensionskasse posts -6% returns, only real estate positive, Print advertising rates and specifications, Digital advertising technical specifications (pdf). | Terms and conditions | Privacy Policy | Cookie Policy, IEA: Renewable powers growth is being turbocharged as countries seek to strengthen energy security, European Union agrees law to fight global deforestation and forest degradation, Circular strategies could cut emissions from materials used in vehicles by 60% by 2040, WWF: Huge rise in demand for sustainable goods during Pandemic. Pascal Christory, group CIO at AXA Group, said the metric enabled it to identify transition models and their impact on climate change, but that the ITR metric needed methodological convergence. The TCFD is now saying that absolute Scope 1 and 2 GHG emissions should be disclosed regardless of materiality. Bringing together the financial sector to accelerate the transition to a net-zero economy. A group of experts established by Mark Carney, in his capacity as UN special envoy for climate and finance, has finalised best practice guidance on portfolio alignment metrics to support a new recommendation for investors from the Task Force on Climate-related Financial Disclosures (TCFD). An Advisory Panel of NGOs and technical organizations ensures that GFANZs work is held to the highest standards of ambition while keeping climate science at the heart of everything GFANZ does. Following the public comment period, GFANZ will release a final report prior to COP27 in Egypt. Paris, June 22, 2022 - As part of its "Ambitions 2025" plan presented this morning (1), Crdit Agricole announced decarbonisation targets for the automobile and oil and gas sectors. The launch press release boldly claimed that the "amount of finance committed to achieving 1.5C [is] now at [the] scale needed to deliver the transition". GFANZ is not a standard-setter, though, and its influence depends on the support of its member institutions. 43 banks from 23 countries (with assets of US$28.5 trillion) form the Net-Zero Banking Alliance (NZBA) today - which joins GFANZ - with its members committing to align operational and attributable emissions from their portfolios with pathways to net-zero by 2050 or sooner. GFANZ (Glasgow Financial Alliance for Net Zero) was announced with great fanfare at COP26 in Glasgow, and now boasts 450 members with $130 Trillion in assets under management. Its a long list of questions, and there are multiple credible responses for each one. Hence the buzz over portfolio alignment metrics (PAMs) the measurement systems firms can use to understand what investment, lending, and underwriting activities support a 1.5C warming pathway. or implied in the Note is intended to create legal relations and the Note does not create legally enforceable obligations. This workstream will support the development and adoption of portfolio alignment metrics and drive convergence in the way portfolio . The alliances goal is to bring about convergence on best practice, improve the transparency on the assumptions that underpin PAMs, and broker agreement on their methodological frameworks. For example, GFANZ recommends in respect to judgment 4 what scope of emissions should be included? that Scope 3 emissions be factored into company-level alignment for certain priority sectors, including oil and gas and electric utilities. Hundreds of science-based interim targets have been published by firms. The question is to what extent member institutions are willing to follow them and amend the PAMs they have in use accordingly. Speakers: Saker Nusseibeh, David Blood, Leyla Javadova, Bert Kramer, Jared Westheim, Girish Narula, Jaakko Kooroshy, Maarten Vleeschhouwer, Margaret Kuhlow . Announcement made on the expanded partnership with Bloomberg Philanthropies to support developing countries across Africa, Asia, and Latin America to accelerate coal phaseout. GFANZ regularly publishes resources in the areas of financial institution net-zero transition plans, mobilizing capital for emerging markets and developing economies, and net-zero public policy. This being the case, a keep it simple, stupid approach may be unhelpfully reductive. 3233596, VAT No. 15 June 2022 was a big day for the climate finance community with announcements made by the UN-backed Race to Zero ("RTZ") campaign and the Glasgow Financial Alliance for Net Zero ("GFANZ").. Race to Zero campaign. Content Tags: Portfolio Management Transition Emissions Over 90 of the founding institutions of GFANZ have already delivered on setting short-term targets, including 29 asset owners that have committed to reducing portfolio emissions by 25-30% by 2025, as well as 43 asset managers that have published targets for 2030 or sooner. The draft Glasgow Financial Alliance for Net Zero (GFANZ) Portfolio Alignment Measurement report is out. More than 30 million individual investors around the world have chosen to entrust Vanguard with their hard-earned savings. My portfolio value in July 2020 was identical to a year earlier, but life was much less pleasant due to the emergence of COVID-19 and all that meant. Vanguard, one of the largest investment managers in the world, announced today that it is withdrawing from the Net Zero Asset Managers initiative (NZAM), a major multi-trillion dollar group of investment managers committed to supporting the goal of net zero greenhouse gas emissions by 2050. That is why we support the TCFD-commissioned work on portfolio alignment tools, presented in the PATs report published today, he said. An update on Vanguard's engagement with the Net Zero Asset Managers initiative (NZAM) December 07, 2022. This suggests it's a flawed metric for conducting the kind of portfolio-level analysis GFANZ members are keen on. GFANZ said the report includes "new and improved guidance to measure the alignment of financial institutions' investing, lending and underwriting activities towards net-zero commitments." It added that it was gathering feedback on proposed improvements to measure whether investment portfolios are targeting net zero. 2022 CONCEPT NOTE ON PORTFOLIO ALIGNMENT MEASUREMENT, This report was developed by the GFANZ workstream on Portfolio Alignment Measurement with input, from the GFANZ Principals Group, Steering Group, and Advisory Panel. Manifest Climate Inc. 160 Bloor Street East, Suite 1010 Toronto, ON M4W 1B9, Manifest Climate Inc. - New York 127 W 30th Street, 9th Floor New York, NY 10001, [email protected] +1 (877) 762 6433, GFANZ Wants to Whip Portfolio Alignment Metrics into Shape, Want climate insights delivered right to your inbox? More than 100 financial institutions have joined GFANZ through the sector-specific alliances. members to increase their ambition over time. The members of the GFANZ Private Finance Working Group for Egypts Nexus for Water, Food & Energy (NWFE) express their strong support for the Government of Egypts (GoEs) ambitious plan for energy transition via NWFE. The Transition Pathway Initiative, for instance, argued that the TCFDs endorsement of ITRs would create pressure on investors to invest time and effort in providing such disclosures. Others spoke out against what they saw as the TCFDpicking winnersin the blossoming competition among PAM providers. In a similar vein, the PAT amended its recommendations regarding tool choice to ensure these did not suggest that all institutions move towards an implied temperature rise (ITR) metric in the long term. . At COP26, the group revealed it now represented more than $130trn in assets under management. When you consider the disclosure around transition plans, a lot of that will capture Scope 3 emissions as well, so we think were narrowing the universe of companies that wont also be disclosing Scope 3, MarySchapiro, head of the TCFD and vice chair for global public policy at Bloomberg L.P., told journalists yesterday. The guidance featured in the report, therefore, is intended to apply to the whole spectrum of PAMs. The chairs were referencing a June update from Race to Zero, an influential coalition promoting net zero and . GFANZ further pledged to deliver as much as $100 trillion in financing to help emerging economies transition to net zero over the next three decades. 2022 Glasgow Financial Alliance for Net Zero. This is especially important for those firms in the Glasgow Financial Alliance for Net Zero (GFANZ), the umbrella group of climate finance initiatives dedicated to decarbonizing the economy in line with the aims of the Paris Agreement. As a result, this guidance enables financial institutions to better measure how aligned a portfolio or lending book is with net-zero objectives. Instead, it states that asset managers and asset owners should use whichever approach or metrics best suit their organisational context or capabilities. In fact, in adraft versionof its 2021 implementation guidance, the group recommended that financial institutions measure and disclose the alignment of their portfolios consistent with a 2C or lower temperature pathway, a task arguably best suited for ITR-style PAMs. Course Hero is not sponsored or endorsed by any college or university. What may be lost in terms of accessibility and the ability to easily compare portfolio alignment across firms would be more than made up for through greater transparency. All Rights Reserved. Visit our Publications section to review and download our reports. This 50% by 2030 cut is a key part of the . In light of GFANZ's recent decision to downgrade its ties with the UN Race To Zero Campaign, it is positive to see co-chairs Michael Bloomberg and Mark Carney, and vice-chair Mary Schapiro, stressing the need to halve CO2 emissions by 2030 in the foreword to their detailed report giving guidance on financial institution net-zero transition plans. GFANZ issues draft statement on the Country Platforms model for increasing capital for emerging markets and developing economies (EM&DEs). On Tuesday, it published areport on portfolio alignment metricsthat includes guidance for designing and implementing effective PAMs. . Should you use absolute emissions or intensity? Guidance has previously been published by GFANZ on sectoral pathways for transition for financial institutions. However, if the PAM were amended to incorporate Scope 3 emissions the metrics output may show it is actually closer to a 2C or even 3C warming trajectory. Guidance / Tool - 2020 As an increasing number of countries legislate for net zero, investors and lenders will need tools to identify risks and opportunities in the transition to a net zero economy. The Note has been provided for information purposes only and the information contained herein was prepared at the date, No representation, warranty, assurance or undertaking (express or implied) is or will be made, and no responsibility or, liability is or will be accepted by any member of GFANZ or by any of their respective affiliates or any of their respective. New pan-sector framework for financial institution transition planning supports actionable strategies and unprecedented accountability on net-zero commitments. Despite the work of Race to Zero, GFANZ, and its affiliated alliances to create Paris-aligned science-based goals of net zero by 2050, with their updated criteria, the group has come under fire from both members and environmental activists and was still accused of greenwashing. Covering the financial gamut, GFANZ has seven sector-specific alliances to "drive progress at the grassroots level to raise the ambition on net-zero commitments, increase engagement, and support their members' acceleration of their alignment journeys." Each alliance operates under the same goalnet zero emissions by 2050 or sooner. The 2021 PAT report identified three key categories of portfolio alignment metrics tools to support financial institutions' efforts: Binary target measurements measure the alignment of a portfolio with a given climate outcome based on the percentage of investments or counterparties in a portfolio with net-zero, Paris-aligned targets. It could also have significant business implications. Asset manager says feedback misrepresents, or risks misrepresenting, implied temperature rise metrics, Investors involved with Transition Pathway Initiative raise concerns about series of undesirable consequences, Government says Sustainability Disclosure Requirements to cover corporates, financial services firms, and pension schemes, New investments will focus on decarbonisation, the digital revolution, and emerging markets, Plus:BlackRocks LifePath UK adopts formal ESG policy, High inflation, central banks bumping up interest rates, and prospects of recessions in the US and in Europe have had an impact, Copyright 19972022 IPE International Publishers Limited, Registered in England, Reg No. Glasgow Financial Alliance for Net Zero (GFANZ) | 3,586 followers on LinkedIn. Taming the metrics zoo, therefore, is no small matter. Portfolio alignment Finally, GFANZ has today released a guide to portfolio alignment for net zero. How should forward-looking emissions be estimated? GFANZ provides the tools and resources the financial sector needs to implement its net-zero commitments. The Alliance accounts for 40% of the world's total financial assets, up from $90trn at the start of October. ITRs are a relatively new tool and have been the subject of heated debate, although they are being used by organisations such as AXA and Japans Government Pension Investment Fund. SME News Service. Portfolio alignment Finally, GFANZ has today released a guide to portfolio alignment for net zero. Summary: Hear from our keynote speakers about the importance of aligning portfolios to Net Zero targets. Certain metrics are, after all, more difficult to put together than others. "Portfolio alignment metrics are a really significant tool for investors as they pursue their net-zero goals." Welcome to IPE. A GFANZ spokesperson confirmed the change in requirements to RI and said: "GFANZ and the sector-specific alliances will continue to note the advice and guidance from Race to Zero, as well as other international bodies, such as the UNFCCC, IPCC, IEA, the G20's Financial Stability Board, and the UN's High Level Expert Group on net zero." 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