• Why in news: 1^st week of COP26 saw the launch of GFANZ, which said its members – some 450 firms in 45 countries – had committed $130tn towards the net-zero transition.
• Objective: To bring together leading net-zero initiatives from across the financial system to accelerate the transition to net-zero emissions by 2050 at the latest.
• Existing and new net zero finance initiatives will be part of the Alliance. They comprise the Net Zero Asset Managers Initiative, the UN-convened Net-Zero Asset Owner Alliance and the newly launched Net-Zero Banking Alliance.
• How it operates? All GFANZ members must use science-based guidelines to reach net zero emissions, cover all emission scopes, include 2030 interim target setting, and commit to transparent reporting and accounting in line with the UN Race to Zero criteria. It is not meant to withdraw funding from carbon-intensive industries altogether. Instead, GFANZ members will engage climate experts, the NGO community, and governments, to develop sectoral pathways to achieve climate economy – one that is low-carbon and, most importantly, climate resilient.
• What is so special about it? GFANZ leverages the power of large financial institutions to align with the 1.5 degrees Celsius goal of Paris. It will also catalyze strategic and technical coordination on steps firms need to take to align with a net zero future.
• Criticism: GFANZ agreements are largely voluntary, the headline $130tn figure was “not a fresh pool of money and most of it isn’t allocatable” & it also included home mortgages and money to fund fossil-fuel infrastructure. And there is lot of skepticism about the climate pledge of financial firms as banks continue to help arrange loans and bond-sales for fossil-fuel companies.

Sources:

• Glasgow Financial Alliance for Net Zero
• COP26: Key outcomes agreed at the UN climate talks in Glasgow
• COP26 AND THE GLASGOW FINANCIAL ALLIANCE FOR NET ZERO (GFANZ)