Raft of climate finance investment and standards announced at COP26

The Glasgow Financial Alliance for Net Zero (GFANZ) announced that the amount of finance committed to achieving 1.5°C is now at scale needed to deliver the transition. Firms representing $130 trillion of assets have committed to net zero, up from $5 trillion when the UK and Italy assumed presidency of the 2021 United Nations Climate Change Conference (COP26).

These commitments, from over 450 firms across 45 countries, can deliver the estimated $100 trillion of finance needed for net zero over the next three decades. To support the deployment of this capital, the global financial system is sorting out 24 major initiatives for COP26 that have been delivered for the summit.

Firms across the entire financial spectrum – banks, insurers, pension funds, asset managers, export credit agencies, stock exchanges, credit rating agencies, index providers and audit firms – have committed to high ambition, science-based targets, including achieving net zero emissions by 2050 at the latest, delivering their fair share of 50% emission reductions this decade, and reviewing their targets towards this every five years. All firms will report their progress and financed emissions annually.

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. And the first targets have also been published by Net Zero Banking Alliance members.

The 24 other major finance initiatives, led by Mark Carney as part of the private finance priorities for COP26, aim to mainstream and scale financial architecture using climate-related reporting; climate risk management; climate-related investment returns and the mobilization of private finance to emerging and developing economies.

The IFRS Foundation, the international accounting standard body, announced the establishment of a new International Sustainability Standards Board to develop globally consistent climate and broader sustainability disclosure standards for the financial markets. This work has been welcomed by Finance Ministers from over 50 countries stretching across 6 continents and follows support from the G7 and others to make climate disclosures mandatory.

The ISSB will have a global and multi-location presence, and the seat of the Board and the office of the Chair will be in Frankfurt. Theodor Weimer, CEO of Deutsche Börse, said in a statement: “It pays testament to the important role of our financial center in Europe and the world, and will benefit from the sense of innovation and deep conviction of all local players that sustainability has become the decisive factor – not a nice-to-have – for the wellbeing of our global economies and societies.”

In addition, the Network for Greening the Financial System provided a climate risk management progress update. Thirty-eight central banks, in countries comprising 67% of the world’s emissions, have committed to climate-related stress tests to review the resilience of the world’s largest financial firms in the face of several climate-related risks. And 33 central banks and supervisors, representing 70% of the world’s emissions, have committed to issuing guidance to firms on managing climate-related financial risks.

And to measure more accurately the alignment of lending, investment and underwriting with net zero, the Taskforce on Climate-related Financial Disclosures (TCFD) has published guidance on metrics, targets and transition plans.

Finally, for COP26, GFANZ co-chair Mark Carney is publishing a new plan on how to scale private capital flows to emerging and developing economies. This includes the development of country platforms to connect the now enormous private capital committed to net zero with country projects, scaling blended finance through MDBs and developing high integrity, credible global carbon markets.

UN Special Envoy on Climate Ambition and Solutions and Race to Zero Ambassador Michael Bloomberg will join UN Special Envoy Mark Carney as co-chair of GFANZ. Mary Schapiro, head of the Secretariat for the Taskforce on Climate-related Financial Disclosures and former chair of the US Securities and Exchange Commission, will be the vice-chair. They join UN High Level Champion Nigel Topping in the GFANZ leadership team. A new permanent secretariat will have a presence in Europe, the Americas, Africa, and Asia. GFANZ also unveils it will periodically report on its work to the G20’s Financial Stability Board.

Mark Carney, UN Special Envoy for Climate Action and Finance and COP26 private finance advisor to UK Prime Minister Boris Johnson said in a statement: “We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account. Only this mainstream focus can finance the estimated $100 trillion of investment needed over the next three decades for a clean energy future.”

Michael Bloomberg, co-chair of the Glasgow Financial Alliance for Net Zero, said in a statement: “Winning the battle against climate change will require vast amounts of new investment and the majority will have to come from the private sector.”

Klaas Knot, vice chair of the Financial Stability Board, said in a statement: “An orderly transition of the financial sector to meeting net zero commitments supports financial stability.”

In other announcements, IOSCO (International Organization of Securities Commissions) published a set of recommendations about sustainability-related practices, policies, procedures and disclosures in the asset management industry to address “greenwashing concerns”. The European Securities and Markets Authority released an overview of its efforts for sustainability in the financial system.

Meanwhile, BlackRock announced a $673 million final fundraise for the Climate Finance Partnership (CFP), a flagship public-private finance vehicle focused on investing in climate infrastructure across emerging markets in order to help accelerate the global transition to a net zero economy. A global consortium of 22 investors including governments, philanthropies, and institutional investors committed to the fundraise, which was oversubscribed and exceeded its target of $500 million.

“Achieving a just transition to a net zero economy by 2050 requires long-term planning and close coordination between the public and private sectors,” said Larry Fink, chair and CEO of BlackRock. “This partnership is proof that governments, philanthropic organizations, and institutional investors can come together to mobilize capital at scale into emerging markets, which are most exposed to the impact of climate change.”

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