The UN Environment Programme Finance Initiative (UNEP FI) has issued a number of recommendations G20 leaders should use to call on financial institutions to adopt and support the transition to net zero.
The framework will help financial groups set net-zero targets and achieve them by providing guidance on transparency around greenhouse gas (GHG) emissions, financing of fossil fuel developments and unlocking emerging technologies.
Eric Usher, head of UNEP FI, said: “The purpose of these recommendations is not only to support financial institutions to credibly achieve net zero, but to catalyse change in the real economy.
“In the absence of a globally agreed framework, the voluntary leaders are making progress. However, we would like to see all banks, insurers and investors adopt the recommendations with support from members of the G20. The guidance, which is underpinned by the best available science, can be applied across all sectors of the global economy.”
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While noting that finance firms themselves tend to be small emitters, he noted they are positioned to exert influence over companies and monitor the financial transition.
Mainly, the UNEP FI is calling for financial institutions to use a science-based definition of net zero and to use sector pathways to track different companies’ progress according to their industry sector. This, the organisation said, will ultimately allow financial institutions to gain a holistic view of their alignment with a 1.5°C pathway and enable them to see whether they – and the real world companies within their portfolios – are on track to reach net-zero by 2050.
The framework has 11 recommendations, which include:
- Align with science-based targets with no/low overshoot 1.5°C scenarios
- Align as soon as possible and establish near-term (ideally 5-year) targets
- Establish transparency regarding GHG emissions and their allocation to real economy inventories and strive for real-economy impact
- Establish an appropriate emission scope, striving for full coverage as soon as possible so that as data allows for the financial institution to also address Scope 3
- Finance the transition, which also includes unlocking emerging technologies that will play a future role in the transition
Nate Aden, senior fellow at the Science Based Targets initiative (SBTi) SBTi/WRI, which contributed to the recommendations, said: “As net zero becomes a common threshold for climate ambition, these UNEP FI recommendations add to the urgent conversation around consistency and credibility.
“G20 policy makers and financial institutions can catalyse more effective private sector mitigation action by anchoring net-zero frameworks in climate science. The Science Based Targets initiative welcomes the inclusion of our Net-Zero Foundations and Corporate Standard in these recommendations and looks forward to working with UNEP FI and other stakeholders on developing a science-based net-zero target setting standard for financial institutions.”
