What Is Gfanz? And Who Are the Members?
Initiated in April 2021, the Glasgow Financial Alliance for Net Zero (GFANZ) is a voluntary coalition of financial institutions brought together to accelerate the global transition to a net zero economy. Inaugural members of the group include some of the world’s largest banks such as Bank of America, Santander, and Natwest; asset managers such as BlackRock; and asset owners such as The Rockefeller Foundation. These Principal members steer the GFANZ strategy and direction and track progress toward its goals.
The group was named after the Conference of Parties (COP) host of the same year, COP26, in Glasgow, Scotland. Created by UN Special Envoy for Climate Action, Mark Carney and COP27 President Alok Sharma, GFANZ is part of a wider partnership with Race to Zero, an UN-backed global campaign to help companies, cities, financial institutions, and educational institutions set and reach net zero targets.
GFANZ now includes over 450 of the world's largest financial institutions with over $130 trillion in assets, all with the joint objective of reducing their emissions to net zero by 2050 and mitigating climate change. As a stipulation of joining GFANZ, members are expected to make and keep commitments to science-based net zero targets across all Scope 1, 2, and 3 emissions by 2050, with an interim target in 2030.
GFANZ members regularly submit transparent and accurate progress reports toward their goals, which GFANZ aggregates and publishes in its own progress report.
GFANZ Progress Report
The first GFANZ progress report was released at COP27 to highlight the progress the group made in its first 6 months. In that time, the group grew from 20 GFANZ principal groups to over 40 members.
The report lays out the plans of the group going forward, the goals it hopes to achieve, and the key criteria financial institutions have to meet to become members, which are in line with the rule of the Race to Zero criteria, including:
- Net zero emissions across all scopes by 2050 using science-based guidance
- Interim goals by 2030 that represents a fair share of 50% of the way toward net zero
- Create and publish a net zero transition plan
- Transparent carbon accounting and reporting toward targets
- Strict restrictions on offsets
The report gives clear guidance on how financial institutions can meet these criteria, with clear workstreams organized around driving member commitment, engagement, investment, and alignment with the necessities of transitioning the financial system to net zero. Additionally, the report provides sub-sector-specific information for banks, asset managers, asset owners, and insurers, through the sub-sector GFANZ alliances and groups, such as the Net Zero Bankers Alliance.
Net-Zero Banking Alliance
GFANZ is one of the multiple voluntary financial groups affiliated with GFANZ and Race to Zero, which share the same goals of reaching net zero but have guidelines specific to a sub-sector of finance. The Net Zero Banking Alliance (NZBA) is just one of these groups. It started in April 2021, at the same time as GFANZ, with 43 founding members. Since then, the group has doubled in size to 92 banks, representing 40% of all global banking assets. Some of the other financial groups aligned with Race to Zero’s pledge preceded GFANZ, while some came after. These include:
The Net Zero Asset Owners Alliance (NZAOA) - Launched at the UN Secretary General’s Climate Action Summit in September 2019, NZAOA was the first net zero finance initiative to join the Race to Zero. Now representing 60 asset owners with over $10 trillion in AUM, the group ensures that its members set ambitious intermediary goals every five years. The first to be published in 2025 is based on their 2025 target-setting protocol, which goes through new iterations every year. NZAOA has also agreed to a phase-out of most thermal coal assets in industrial countries by 2030 and a full phase-out globally by 2040.
The Net Zero Asset Managers (NZAM) - Launched in December 2020, NZAM now has over 220 signatories with $57 trillion AUM. NZAM has seen huge growth since its inception, quadrupling in member size and representing more than half of the asset management sector globally. They also introduced their own policy on fossil fuel investment, expecting signatories to adopt a science-based policy on investment in fossil fuels.
The Net-Zero Insurance Alliance (NZIA) - Launched in July 2021, NZIA is composed of thirteen of the world’s largest insurers and reinsurers, representing $565 billion in gross premiums written and 9% of all global premiums written. Members will be expected to set intermediate emissions reduction targets every five years and report on their progress publicly. NZIA is currently working with PCAF to develop the first global standard to measure and disclose insured greenhouse gas emissions.
The Net Zero Investment Consultants Initiative (NZICI) - Launched in September 2021 at Climate Week NYC, NZICI brings together 12 of the world’s largest investment consultants responsible for $10 trillion in assets. NZICI's key actions include integrating net zero advice with current financial advice and, within two years, helping their clients prioritize decarbonization.
The Net Zero Financial Service Providers Alliance (NZFSPA) - Launched with NZICI at Climate Week NYC, this group brings together 22 of the leading financial service providers, including two of the world's largest credit rating agencies and two of the world’s largest stock exchanges. With this commitment, financial service providers aim to enable financial institutions with the data, services, and products needed to reach net zero goals.
Together these groups make up the entirety of the financial sector. Their growing membership and sub-sector-specific goals and guidance will help unlock a net zero financial system.
Despite the work of GFANZ and its affiliated alliances to create Paris-aligned science-based goals of net zero by 2050, the group has come under fire. Its rules were considered too flexible on fossil fuels when they were released and were accused of greenwashing after a recent update.
GFANZ and Race to Zero
Race to Zero is an UN-affiliated group that commits cities, regions, companies, financial institutions, and higher education institutions to net zero by 2050. To join Race to Zero, members need to meet minimum criteria. Currently private and public bodies representing 25% of global emissions and 50% of global GDP are members of Race to Zero. The GFANZ members follow the same minimum criteria for membership as accredited by Race to Zero.
In June 2022, the Race to Zero coalition introduced an update to its rules. The updated criteria included guidance on making explicit the phasing down and out of fossil fuels as part of a just transition, something which was previously implicit, and reiterating the need for financial institutions to include financed emissions in their net zero commitment. The new criteria were aimed to reveal “those actors who are truly moving ahead versus those who are trying to find loopholes.” Subsequent to the release of these updated rules, a series of Wall Street banks, including JPMorgan, Morgan Stanley, and Bank of America, threatened to leave GFANZ, claiming that the new rules, specifically those related to the phase-out of fossil fuels, leave their companies open to being sued.
In September 2022, two pension funds, Cbus Super and Bundespensionskasse left the NZAOA, becoming the first financial institutions to leave any GFANZ-affiliated group. The two funds cited resourcing as the reason for leaving the group but maintained that they had not changed their net-zero targets.
Despite the work of Race to Zero, GFANZ, and its affiliated alliances to create Paris-aligned science-based goals of net zero by 2050, with their updated criteria, the group has come under fire from both members and environmental activists and was still accused of greenwashing.
Is GFANZ Greenwashing?
The updated criteria set out by Race to Zero in June 2022 meant that GFANZ members could not continue to make new investments in fossil fuels like coal, gas, and oil by June 2023 and could only keep their current oil and gas investments, subject to an eventual phasing out of these assets. Its new 113-page transition planning document was intended to improve current guidelines and avoid greenwashing, but critics believe it still has too many loopholes, allowing members to greenwash.
Others see the new GFANZ rules as a move in the right direction, claiming that the new rules clarify how members must move away from fossil fuels. However, GFANZ has dealt with other instances of greenwashing relating to not requiring third-party verification of its member’s progress and accusations of a lack of transparency.
What are Financed Emissions? And How Do They Relate To GFANZ?
Financed emissions are the GHG emissions related to investments, loans, and other financial services. For GFANZ members the majority of their emissions will come from their financed emissions, also known as, Scope 3 Category 15: Investments. In fact, financed emissions made up over 700x the operational (Scope 1 and 2) emissions for financial institutions that disclosed their financed emissions to the CDP.
Currently, only 25% of the financial institutions that report their emissions to the CDP report their financed emissions. This leaves a significant blind spot in the majority of financial institutions' carbon footprints, contributing to accusations of a lack of transparency. As GFANZ members move to reduce their emissions in line with a net zero goal, measuring and reporting financed emissions will be integral, before they can start reducing financed emissions through green financing and other portfolio decarbonization strategies.
Groups like GFANZ and its affiliations show that measuring, managing, and reducing carbon is now a critical part of providing financial services. However, the vast majority of financial institutions are still in the early phases of measuring their climate impact and reducing their emissions. To find out how Persefoni can help financial institutions measure, manage, and reduce their climate impact, watch our webinar “Carbon Accounting for Financial Markets” or reach out to us to learn more!