Carbon neutrality: finance's considerable commitments

At COP26, the Glasgow Financial Alliance for Net Zero (GFANZ), a group bringing together 450 financial players with $130,000 billion in assets, pledged to achieve carbon neutrality by 2050. While this is a spectacular commitment in the fight against climate change, it is greeted with skepticism by NGOs and international organizations.

450 financial players commit to carbon neutrality by 2050

Mark Carney, former Governor of the Bank of England and founder of the Glasgow Financial Alliance for Net Zero (GFANZ), promised that financial players would make considerable commitments to the climate.

The announcements, made on the occasion of a day dedicated to finance at COP26, lived up to expectations: GFANZ, which brings together 450 financial players representing $130,000 billion in assets, has committed to achieving carbon neutrality by 2050, with intermediate targets set for 2030.

GFANZ, launched in April 2021, counts among its signatories:

  • insurers,
  • banks,
  • pension funds,
  • listeners,
  • index suppliers,
  • asset managers,
  • export credit agencies.

All these financial players, under the leadership of Mark Carney, have visibly admitted that to achieve their carbon neutrality objectives, they would need to invest $125,000 billion, including $32,000 billion over the next ten years.

After declaring its readiness to disburse such sums, GFANZ announced that it was waiting for institutions and governments to set up carbon-neutral projects, before the various financial players could begin their investments.

NGOs and international organizations deem announcements lacking in credibility

While the announcements made by global finance are spectacular, they have nevertheless been received with a great deal of skepticism by international organizations and NGOs.

UN Secretary General Antonio Guterres spoke of a " lack of confidence " and a " credibility deficit ", underlining a certain confusion in the targets announced, " with different interpretations and indicators ".

NGOs also point the finger at financial investments in fossil fuels. Lucie Pinson, Director of the NGO Reclaim Finance, pointed out that 65% of the assets held by these financial players do not comply with climate commitments. According to the IMF, 0.26% of global funds are compliant with the Paris Agreement.

According to the Financial Times, the GFANZ's commitments to carbon neutrality exceed the 123,500 billion in bonds or the $121,000 billion in total capitalization of the world's stock exchanges, making the announcements made by financial players hardly credible.

Furthermore, the very nature of carbon neutrality targets is not clearly defined. According to the Science-based targets initiative (SBTi), which verifies whether companies' climate commitments are consistent with scientific data, the "net zero" target is too vague. This lack of precision and consistency benefits financial players, whose assertions are impossible to verify scientifically.

Meanwhile, the findings of the latest report from the French supervisory authority, the Autorité de contrôle prudentiel et de résolution, don't exactly give financial players much cause to take their word for it. According to the report, financing to hydrocarbons by French banks and insurance companies has, in 5 years, increased by 28 billion euros, from 146 billion euros in 2015 to 174 billion euros in 2020.