In the Fight to Get to Net-Zero Emissions Two New Acronyms Are Born: GFANZ and NZIA

In yesterday’s blog post I described how fossil fuel and energy industry companies are looking to carbon capture and sequestration (CCS) technology to help sustain their businesses while reaching out to governments to subsidize this pursuit. Will they succeed or fail? And will banks and insurance companies back them despite the less than stellar record of current CCS projects?

With the run-up to COP26 in Glasgow, Scotland, this November, I’m not sure what will be the appetite for the financial industry to support CCS projects versus renewable energy endeavours even though climate mitigation strategies being adopted by governments have included the technology and stated in their goals that it will be responsible for 15% of global emission reductions by mid-century.

Considering the formation of two new alliances, GFANZ and NZIA, if I were in government, and the energy and fossil fuel sectors, I wouldn’t be all that confident about that 15% or finding the money from the financial and insurance sectors to meet that target.

GFANZ Organizes Financial Institutions to Get to Net-Zero 

Launched in April of this year, GFANZ stands for The Glasgow Financial Alliance for Net Zero and is chaired by Mark Carney, former head of the Bank of Canada, the Bank of England, and currently UN Special Envoy on Climate Action and Finance.

GFANZ is bank-focused, bringing together 160 financial institutions including 87 asset managers, and 43 banks in 23 countries, and representing more than $70 trillion US in assets.

The goal of GFANZ is to invest trillions to build a zero-emissions economy for the planet. All members (they are still recruiting more) agree to follow science-based milestones both short and long-term to get to net-zero by no later than 2050.

The banking membership has signed a commitment to:

• Align operational and attributable emissions to the goal of net-zero by 2050 or sooner within their lending and investment portfolios.
• set science-based 2030 targets (or sooner) within 18 months, and staged targets every 5 years from 2030 onwards until 2050 net-zero is achieved.
• focus the first 2030 targets on greenhouse gas emission (GHG) intensive sectors as the initial priority.
• set within 36 months of joining a further round of sector-level targets for a significant majority, or all of the specified carbon-intensive sectors mentioned here including agriculture, aluminum, cement, coal, commercial and residential real estate, iron and steel, oil and gas, power generation and transportation.
• ensure that banks engage all clients in decarbonization activities as part of their fiduciary and environmental responsibility.
• publish absolute emissions and emissions intensity data annually within a year of setting targets and disclose progress against announced transition strategies.
• take a robust approach to the role of offsets in transition plans.

NZIA Organizes Insurers to Underwrite Net-Zero

Launched in July of this year, NZIA stands for the Net-Zero Insurance Alliance and includes eight of the world’s largest insurance companies and reinsurers including AXA, Allianz, Aviva, Generali, Munich Re, SCOR, Swiss Re, and Zurich. AXA’s Group Chief Risk Officer, Renaud Guidée chairs the group.

NZIA members are committed to achieving net-zero emissions by setting underwriting criteria and guidelines for the most GHG-intensive activities within their portfolios. In addition, they pledge to:

• engage clients present and future about their decarbonization strategies and net-zero transition pathways.
• develop and offer insurance and reinsurance solutions for low-emission and zero-emission technologies and nature-based solutions that absorb GHG emissions.
• improve claims management in an environmentally sustainable manner.
• integrate net-zero and decarbonization-related risk criteria into their risk management frameworks.

In November when COP26 convenes in Glasgow, Scotland, both GFANZ and NZIA expect to have received commitments from many more investment and insurance companies. Likely, NZIA will get rolled into GFANZ at that time which means one less acronym to learn in the fight to mitigate climate change.