COP26: GFANZ members commit $130 trillion of private capital to net zero transition

You may have heard the term GFANZ over the last few days. It is not a new range of green fans or the name of an Ali G fan club. It is in fact a coalition of hundreds of financiers and funds who are mobilising to plug the net zero investment gap by providing the capital that the UN has said is needed to prevent the worst case climate change scenarios. In this blog post, we summarise the key aspects of this alliance.

What is GFANZ?

The Glasgow Financial Alliance for Net Zero (GFANZ) was founded in April 2021. It was originally chaired by Mark Carney (UN Special Envoy for Climate Action and Finance) and brought together over 160 financial firms that were at the time responsible for assets in excess of US$70 trillion. 

The purpose of the alliance is to mobilise the private capital needed for a global net zero emissions economy and provide a forum for strategic coordination for leaders of financial institutions. 

All GFANZ signatories have to set science-aligned interim and long-term targets to reach net zero no later than 2050 and supplement this with short-term targets and action plans.

COP26 announcements

At the opening conference for COP26’s climate finance day (3 November 2021), Mark Carney took to the stage and announced some significant milestones for GFANZ:

• The alliance has grown from circa 160 firms to over 450 firms across 45 countries with assets under management exceeding US$130 trillion. Members include banks, insurers, asset managers, pension funds, export credit agencies, stock exchanges and audit firms.
• All members of GFANZ have not only committed to science-based net zero targets but also pledged to review their net zero targets every five years and report on progress and financed emissions annually.
• Carney also called for G20 countries to implement policies that would allow GFANZ members to unlock and accelerate capital to support the transition.
• GFANZ will now have two chairs – Mark Carney and Michael Bloomberg, former mayor of New York. Mary Schapiro, former chair of the US Securities and Exchange Commission, will become vice-chair of the alliance. GFANZ will report on its work periodically to the G20’s Financial Stability Board.

For more information, see here and here.

What next?

With trillions of dollars effectively committed to the net zero transition, attention will now turn to how quickly these funds can be deployed, and what they will be deployed to. Criticism has already been levied at GFANZ for allowing members to continue to finance fossil fuel projects. There are also concerns that the money being committed is already tied up in other investments and therefore cannot be re-allocated easily.

It is clear that the GFANZ chairs are optimistic about the potential for real change, particularly if other actors work with the alliance. In a piece for Bloomberg news, Carney and Bloomberg stated that GFANZ stands ready to help deliver the trillions of dollars required to fund the transition to a green future but it needs governments to set clear and credible climate policies and companies to develop credible transition plans: “Good intentions, as we know, are not enough: Roads to hotter places are paved with them. We must turn intentions into action — and the alliance, which we now serve as co-chairs, is helping to do that.”