“Keep growing”: the race to zero raises the bar for investors, companies and cities “pure zero”

Campaigners argue that the new rules “take off the glove” for various alliances in the financial sector.

The Race to Zero campaign has significantly raised the threshold that investors, companies, cities and subnational governments must meet in order to assert that by the middle of the century they are working on clean zero emissions, which should theoretically cause turbocharging. the rapid decarbonisation of corporate and investment activities around the world.

The group, an initiative of the UN Climate Convention, this morning released new criteria that ten thousand members must meet within a year, otherwise they risk being expelled from the campaign.

The document focuses heavily on what is required of members to achieve a 50 percent reduction in global CO2 emissions, which leading climatologists say is needed by 2030, when the world wants to move to a 1.5-degree warming trajectory.

Campaign members should at least stop deforestation and the “phasing out” of all fossil fuels, limiting the development, financing and promotion of new fossil fuel assets. No new coal projects should be included due to the activities of Race to Zero participants, it is emphasized.

Nigel Topping and Mahmoud Mohildin, high-level climate champions at the COP26 and COP27 summits, said the criteria would shed light on those members who would not take significant action to drastically reduce emissions.

“The clarity provided by these criteria, together with enhanced transparency of data, will help us identify progress and gaps remain,” the joint statement said. “They will clearly show those actors who are really moving forward, compared to those who are trying to find loopholes. We urge all actors of “Race to Zero” to continue to intensify, otherwise we risk being removed from the race. “

The new rules will apply to much of the global economy, including 450 financial institutions that are members of the Glasgow Financial Zero Alliance (GFANZ), a coalition of bankers, insurers, investors and asset managers responsible for more than $ 130 tr of assets under management , or about a third of the world economy.

Since the launch of COP26 on climate change, former Bank of England Governor Mark Carney has faced harsh criticism from some environmental companies who claim it has become a tool for some of the most prolific fossil fuel financiers who claim to be working on low-carbon economy, even though it promotes activities that threaten climate goals.

The group, which includes many of the world’s largest banks and institutional investors, does not set its own requirements for mandatory decarbonisation, but requires them to meet the race criteria to zero. So far, the Race to Zero criteria have not included any explicit rules regarding the phasing out of fossil fuels, despite the fact that coal, oil and gas are major factors in overall warming.

Thus, the new zero-race rules could be a major challenge for a large number of investors and corporations that have pure zero targets but continue to invest in fossil fuel assets, arguing that they are working to transition to a zero-carbon economy over time. In particular, the new criteria will mean that GFANZ members must now ensure that their main climate goals take into account the emissions produced by projects that they help fund and promote. This includes all emissions from their investments, lending, underwriting and insurance, as well as emissions from Sphere 3 – or indirect – emissions from the companies they provide services to.

Under the new rules, climate targets should also include “terrestrial emissions”, which poses a particular problem for a large number of multinational companies working with broad global supply chains that can have a huge impact on land use.

In addition, Race to Zero commits all participants to develop transition plans that show how they intend to meet their climate commitments, setting a timetable for the next 12 months, the next two to three years, and 2030.

And Race to Zero members must ensure that their direct and indirect lobbying and interaction is in line with science-based climate goals, and therefore they are required to publicly disclose all affiliations to trade associations within 12 months of joining. Race to Zero members are required to leave industry bodies that do not combine their activities with scientific ways of decarbonisation.

The new criteria emphasize that all public and private sector subscribers to the campaign must commit to a “fair share” of the 50 percent emissions required by 2030, recognizing that members in developing countries “May need more flexibility” and may find it difficult to achieve the goal.

This means that financial institutions and businesses that operate mainly in richer countries will have to go beyond halving their emissions by the end of the decade if they want to ensure a “fair” transition in which they make up a fair share of the rest of the world. carbon budget. .

Paddy McCully, a senior analyst at Reclaim Finance, said the new criteria “take off the glove” for GFANZ and its co-chairs Mark Carney and Mike Bloomberg, noting that the rules should lead to “significant improvements” in what unions require from their members.

“GFANZ will have to stop fossil fuels and will insist that its members stop providing financial services to companies driving the climate, expanding coal, oil and gas, while significantly increasing funding for the transition to clean energy,” he said.

The Race to Zero has stated that its official partners – the various initiatives and networks that make up it – will be responsible for ensuring that their members meet the new criteria. Her own “expert peer review team” will review all activities of the partners, he added.

In addition to the various alliances that make up GFANZ, Race to Zero partners include the SME Climate Center, a Certified Sustainable Business Corporation, Cities Race to Zero, The Climate Pledge and the Business Ambition for 1.5C initiative.

Race to Zero has confirmed that it is also developing a “accountability mechanism” that ensures that members who “consistently fail” to meet the criteria will be excluded from the group.

He expressed hope that his new criteria would eventually lead to higher levels of international standards regarding climate plans and the goals of the private and public sectors.

“Consultations on the criteria showed how far the world has gone in the operation of reliable zero paths, and how much more needs to be done to implement,” said Thomas Hale, co-chair of the expert group on expertise “Race to Zero” and professor at the Blavatnik School of Management. “We now have a much stronger consensus on what makes a company’s, city’s, region’s or investor’s approach to pure zero weak, acceptable or exemplary. The challenge for them now is to move forward.”

In addition to setting a minimum “surface” for companies, investors, and local governments that have signed up for the initiative to be implemented, the report describes the “leadership practices” of firms and groups to be pursued. These include commitments to protect biodiversity and stop deforestation, as well as efforts to extend decarbonisation efforts beyond their own value chain or territory.

In the relevant news, GFANZ this morning released a new zero-value transition plan for the financial sector, a tool designed to help financial institutions prove that their climate plans are aligned with robust ways to reduce emissions.

The group now proposes to express its views on the structure that defines the four “essential approaches” that institutions should follow. These are: funding the development and scaling of zero-value technologies or services to replace high-emission sources; increase support for companies that already follow the 1.5C path; enable companies with real economies with high and low emissions to align business activity in line with the 1.5C path for their sector; and accelerating the “driven phasing out” of high-emission assets through early retirement.

Mark Carney, co-chair of GFANZ and UN special envoy on climate ambitions and solutions, said the structure would encourage investors to redirect capital to companies with “sound and reliable” emission reduction plans.

“Ancillary instruments will facilitate responsible and transparent phasing out of assets stranded as part of an orderly transition,” he said. “Together, these tools, frameworks and resources will guide the financial sector to support real decarbonisation, not the false comfort of portfolio decarbonisation. In the process, they will show the contribution of financial institutions to solving one of humanity’s greatest problems.” “

But campaign participants were less than impressed, arguing that the structure does not require members to stop funding the expansion of fossil fuel projects, which climatologists and the International Energy Agency have warned is urgently needed to achieve global climate goals.

“All this talk of ‘transition’ is worrying given that no major oil client of a financial institution is moving in the right direction,” said Bo O’Sullivan of the Bank of Our Future. “They are all expanding oil and gas production. In order for financial institutions to meet their zero commitments, GFANZ members must stop funding fossil fuel expansion and quickly increase capital for clean energy. We need to see quick evidence that today’s leadership will lead to just that.” .

The importance of the new rules of the campaign “Race to Zero” should not be underestimated. The group has just 10,500 members, including financial giants whose decisions underpin the global economy. The update also arrives the same week as a a separate report is highlighted both more than 80 percent of the world economy and 90 percent of world GDP are now covered by pure zero targets, even if there are still questions about the effectiveness and credibility of strategies designed to achieve these goals.

If the new zero requirements set by Race to Zero are taken into account, they could begin a step-by-step change in global efforts to reduce emissions in the short and medium term, ensuring companies step up decarbonisation efforts and investors cut capital sharply. affecting fossil fuel polluting projects. They could also bring new credibility and boost the reputation of the corporate and financial movement for the zero that has been hit in recent years by accusations of greens.

In recent years, thousands of companies and governments have signed up for the race to zero. The big question now is how many are willing to follow the rules in trying to get to the finish line?

https://www.businessgreen.com/news-analysis/4051325/stepping-race-zero-raises-bar-net-zero-investors-companies-cities “Keep growing”: the race to zero raises the bar for investors, companies and cities “pure zero”

Back to top button