The most important initiatives of the financial industry
In recent years, a number of initiatives have been launched with the goals of supporting companies and/or investors in transitioning to a 1.5 °C pathway, establishing quality standards, and enhancing transparency for all market participants. It is necessary and at the same time good to see that the topic of climate protection and emissions reduction now plays a key role in the strategies of many enterprises in a variety of different sectors. That said, at times it is not easy to keep an overview of all of the initiatives and associations that have come into existence in recent years. This article outlines the most important initiatives and frameworks in this field, focusing on the financial sector.
In the thicket of climate alliances
Race to Zero, supported by the United Nations, is a broad-based campaign to unite businesses, cities, regions, investors, and other non-state actors to quickly and fairly reduce global emissions in accordance with the Paris Agreement. Race to Zero joins together several partner initiatives that monitor their members’ compliance with the required minimum criteria. One of the partner initiatives is the Net Zero Asset Managers initiative, which brings together investors that have committed to transitioning the assets they manage towards net zero emissions. Raiffeisen Kapitalanlage GmbH is a part of this initiative (read more: On the way to Net Zero).
Another member of Race to Zero is the Science Based Targets initiative (SBTi), which offers firms a science-based methodology for formulating and monitoring their CO2 emissions targets. SBTi is a partner of CDP* as well as the UN Global Compact, the World Resource Institute, and the WWF. Raiffeisen Bank International is a member of SBTi. Other relevant frameworks for the measurement and disclosure of corporate climate action pathways include Climate Action 100+, the Transition Pathway Initiative (TPI), and Net Zero Tracker (NZT).
*The Carbon Disclosure Project (CDP) is a non-profit organisation that pursues the goal of supporting companies, states, and cities in the measurement and publication of their environmental data. Raiffeisen Kapitalanlage GmbH is a member of the CDP.
The Paris Aligned Investment Initiative (PAII), founded by the Institutional Investor Group on Climate Change (IIGCC), has also developed a globally recognised methodology for the formulation of climate targets in the form of the Net Zero Investment Framework (NZIF). This offers transparency in relation to investors’ progress on their pathway to lowering greenhouse gas emissions.
The Net Zero Asset Owner Alliance (NZAOA) is an alliance of institutional investors which have undertaken to align their portfolios with net zero emission targets. NZAOA was established by the United Nations and has developed a framework called the Target Setting Protocol (TSP) for the formulation and measurement of climate targets, similar to SBTi and NZIF.
The goal of the Glasgow Financial Alliance for Net Zero (GFANZ) is to bring together net zero initiatives within the financial industry and thus coordinate the industry’s efforts to achieve the Paris climate targets, to reinforce cooperation, and to boost the transparency and reliability of targets. GFANZ was founded at the COP26 climate conference in November 2021. Its members include NZAM, NZAOA, and PAAO (Paris Aligned Asset Owners). GFANZ is a part of Race to Zero.
In recent months, there have been many resignations from various net zero initiatives at the banking, insurance and asset management levels. This is mainly due to political pressure from the US, where the Republican Party has taken a stand against such initiatives. In addition, aggressive net zero targets must be well thought out by the signatories in order to guarantee compliance. In this respect, doubts may have arisen at one or the other institution and the avoidance of negative publicity may have been in the foreground. However, the financial industry is still aware of its importance for achieving the climate goals.
Magdalena Quell
Product and Project Manager at Raiffeisen KAG