The Glasgow Financial Alliance for Net Zero’s (GFANZ) restructuring “gives the group breathing room to strengthen its guidance on transition-informed indices” and better protect against greenwashing risk, according to the latest research from the Institute for Energy Economics and Financial Analysis (IEEFA).
A GFANZ consultation on the development of these indices, which closed in January 2025, proposed an inclusive approach to benchmark construction that is based on the assessment of an entity’s net-zero alignment credentials, rather than on historical emissions profiles. However, less than a month after the consultation deadline, GFANZ put the development of the indices on pause while the alliance is restructured.
As GFANZ works on its restructure, IEEFA is calling on the Alliance to amend its recommendations for transition-informed indices to prevent unnecessary carbon lock-in and solidify investor support.
“Transition-informed indices overcome some of the criticisms levelled at existing climate benchmarks. But without well-defined guardrails, they carry significantly elevated greenwashing risk that will put off many investors,” said Alasdair Docherty, author of the report and a sustainable finance and data analyst at IEEFA.
“It would be surprising for GFANZ to simply scrap transition-informed indices given their alignment with the alliance’s new strategic direction,” continued Docherty. “The restructure gives GFANZ the chance to encourage greater stakeholder urgency and caution. To do so will likely reduce eligible investment universes by slightly more than initially envisaged, but curbing greenwashing risk should bolster investor support.”
Research recommendations
To reduce greenwashing risk and prevent extending support for companies showing no clear or credible timeline for net-zero alignment, the report recommends future transition-informed index guidance should exclude fossil fuel developers from all fixed-income transition-informed indices to protect against misaligned use of proceeds,.
Given the lead times expected before transition-informed indices become commercially available, the report also recommends that guidance should flesh out the case for such indices, bypassing the ‘transition-potential’ category. Guidance should also “strongly suggest” quantitative guardrails to protect against over-inclusivity, with a transition plan a “minimum bar” for inclusion.
IEEFA also recommended that guidance adds corporate lobbying transparency to the qualifying criteria for any transition-engaged index.
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“GFANZ hasn’t quite got the balancing act right. An inclusive approach to benchmark design will be attractive to investors, but setting the bar too low risks transition-informed indices not being taken seriously,” added Docherty.
“The Alliance’s voluntary guidance currently lacks urgency and adequate emphasis on guardrails. But, if it addresses some of the greenwashing concerns, transition-informed offerings stand a good chance of displacing climate-agnostic indices in core investment processes. If this feat can be achieved, the environmental benefits could be substantial.”
