Private financial institutions are increasingly announcing climate commitments to align with the goals of the Paris Agreement and participate in the transition of the global finance industry to net zero emissions by 2050. In the run-up to COP26, these announcements received extra attention from policymakers and organizers.
In 2019, when the Net Zero Asset Owner Alliance launched as a Paris alignment industry coalition, it represented less than USD 4 trillion of assets. Now, the Glasgow Financial Alliance for Net Zero reports that as of April 2022, it “represents over 450 major financial institutions from across 45 countries, controlling assets of over $130 trillion.” Institutions are also adding specifics to their net zero commitments, including by setting interim mitigation targets, investment goals, and divesting from or excluding fossil fuel assets from future financing.
In October 2021, CPI released Private Financial Institutions’ Commitments to Paris Alignment, the first effort to create and measure progress against a commitment integrity classification for the private financial sector. This classification was developed for use by policymakers and the financial sectors to set more ambitious goals and collaborate and report on progress. Since the 2021 report was released, new net zero alliances have launched (the Net Zero Financial Service Providers Alliance and the Net Zero Investment Consultants Initiative) and more institutions have made net zero commitments. While there is continued focus on the breadth and geography of new commitments, there is also an interest in how institutions that have already made these long-term commitments can set more actionable targets.
This report updates some of those numbers and surveys new trends, especially since COP26. Section 2 summarizes the methodology used in the October 2021 report and the scope of this update. Section 3 analyzes the current landscape of net zero commitments, including trends by region, actor type, and measures of commitment quality. Section 4 identifies areas for further research.
This report is the first in a two-part series looking at financial sector commitments and their credibility. Part 2, scheduled for release in October 2022, will focus on approaches policymakers can take to support the private sector in making commitments and ensuring their credibility.