On Monday 24th October, Mark Carney (the UN Special Envoy for Climate Action and Finance at United Nations and Co-Chair of the Glasgow Financial Alliance for Net Zero (GFANZ)), gave evidence to the Environmental Audit Committee (EAC) as part of their investigation into the net zero commitments of the financial sector.

Carbon Tracker attended the evidence session following a period of consultation with the Committee, to hear what Carney had to say about the progress made by GFANZ signatories and how the financial sector is accelerating efforts to decarbonise and reach net zero emissions by 2050. This hearing (and the overall inquiry) is significant as the first time a Parliamentary institution has decided to assess what private finance is doing to tackle climate change. Below is a summary of the key takeaways from the committee hearing:

  • Spotlighting GFANZ workstreams and the positives: Mark Carney acknowledged the Alliance’s work on transition plans guidance, the ongoing managed phaseout of high-emitting assets, and the creation of a net zero data public utility to help address data gaps and boost transparency within the initiative launching in Autumn 2023. However, he did not address how GFANZ will deal with climate laggards or the ongoing fossil fuel financing strategies of its members.
  • Emphasising the need to test voluntary initiatives first, before implementing mandatory requirements: Carney stated that there is scope for a mandatory approach to reporting requirements once transition plans and voluntary initiatives have been tried and tested. Although, this position allows the financial industry to lead and inform government policy and action, making progress in these areas is dependent on the levels of ambition found within the Alliance.
  • Legislating to assist with the energy transition: Mr Carney acknowledged the usefulness of imposing “date certain moratoria” on environmentally harmful activities[i]. Examples provided were the UK’s decision to ban new internal combustion vehicles from 2030, and a similar policy for Canada from 2035. Despite labelling this as an effective approach, Mark Carney did not suggest other possible applications, such as a moratorium on fossil fuel subsidies.
  • Highlighting the need to ramp up spend on renewable energy, without referring to the need to wind down fossil fuel financing: Mark Carney recognised that the ratio of clean to conventional energy needs to rise to an average of 4:1 by 2030.The International Energy Agency’s (IEA) World Energy Outlook (WEO) published last month stated that “Oil, natural gas and coal accounted for around four-fifths of total energy supply worldwide in 2021” and that this share would fall by two-thirds in 2030 under the IEA’s net zero scenario, reaching less than one-fifth in 2050[ii]. Linked to this “between 2021 and 2050, coal demand declines by 90%, oil declines by around 80%, and natural gas declines by more than 70%.[iii]” This shows a major step down is required in our global financing of fossil fuels.
  • Recognising that 60% of the financial sector sits outside of GFANZ: the Alliance’s Co-Chair confirmed that only 40% of the global financial system has made a net zero commitment, leaving 60% – approximately $150tn of balance sheets – outside of GFANZ. These financial stakeholders sit outside of the net zero scrutiny process and are more likely to purchase assets that will be stranded as part of the energy transition.
  • No reference to the UN Race to Zero campaign: Mark Carney did not reference the Alliance’s relationship with the UN Race to Zero scheme, despite it being enshrined within the first GFANZ

Progress Report: There were growing reports of rising tensions over the summer related to the UN’s recent criteria update requiring more stringent reporting rules and targets required from Race to Zero partners, particularly the requirement that GFANZ members should not invest in new coal projects. The second annual GFANZ Progress Report was published days after the EAC hearing, yet it made no mention of any requirements for its members to align with the UN campaign. Exiting the UN accredited scheme could leave financial institutions free to determine the nature of their net zero alignment strategy, providing cover for investors to continue to support new fossil fuel projects.


Inquiry into Net Zero

Launched in May 2022, the Committee invited written submissions of numerous themes; including how the retirement of fossil fuel assets is comparable with UK climate strategy. Carbon Tracker responded to this consultation over the summer[iv].

EAC MPs simultaneously wrote to leading GFANZ signatories with substantial operations in the UK, requesting information on their fossil fuel financing policies, investment strategies towards renewable energy technologies and their view on the IEA’s net zero scenario published in May 2021, which called for no new investment in fossil fuel initiatives beyond 2022. The committee published responses received to the letters the week before the oral evidence session. Following further consultation with the EAC, Carbon Tracker was invited to submit supplementary written evidence to the inquiry, in the form of a high-level analysis of the letters published on 18 October 2022. The briefing identifies the key themes found across the set of replies and reviews the detailed responses to each individual question. Key findings include:

  • Engaging with fossil fuel companies: a considerable number of institutions cited engaging with the companies who are not aligned with Paris goals[v], and who continue to invest in fossil fuels, although they didn’t specify the purpose of their engagement.
  • Fossil fuel exclusion policies: Over 60% of respondents had some form of explicit fossil fuel exclusion policy, however they varied in their scope and coverage of activities. For example, most of the exclusions targeted companies who make 20% + revenue from coal, or unconventional fossil fuels (arctic or oil sand related activities). There was a significant gap in policies targeting fossil fuel expansion across all subsectors. Over 80% of asset owners and banks included some form of fossil exclusion policy, meanwhile only 30% of asset managers had implemented them[vi]. The strongest policies came from the asset owners, who covered more activities than other subsectors.
  • The IEA’s Net Zero report’s support of no new projects: very few investors actively support this because they still lend to new projects. The inquiry has raised issues of responsibility here (e.g., “we don’t specifically fund oil and gas assets”). In response, many vocally support the principal and undertake Paris alignment. Given that the IEA restated its call for no new fossil expansion within the WEO last month, investors and banks will have to address how their financing activities are misaligned with the latest data on global energy demand.
  • Calling out a lack of political action: a number of replies called for more policy actions by governments to target net zero and decarbonisation, in order to incentivise the private sector. Summarised in the line: “we are policy takers, not policy makers.”
  • Energy security: some investors would prefer to take refuge in the fact that energy security has risen up the agenda this year because of geo-political concerns, as a means of defending ongoing investment in fossil fuels.
  • Regional variation: European investors scored more highly than institutions with headquarters in other regions, notably the US and Asia.

As discussed with the EAC, Carbon Tracker intends to build upon this preliminary analysis in Spring 2023 to assess how the climate policies of financial institutions measure up against our latest research.

Looking to COP27

Relevant themes and work programmes to monitor at COP27 and beyond:

  • The development of transition plans for banks and investors to align their financial flows with the Paris Agreement. GFANZ has recently published a document providing guidance on how to convert net zero ambition into action[vii]. The Alliance has also called on the G20 to “close the policy gap” through the application of transition plans for all sectors of the economy[viii].
  • GFANZ work on mobilising capital to emerging markets and developing economies (EMDEs) to support their net zero transition is gaining momentum. Namely the development of carbon markets and new climate finance packages using a blend of public and private finance. For example, the JET-P initiative for South Africa, which was announced in Glasgow last year.
  • Linked to this, managing the phaseout of high-emitting assets, such as coal plants, in a just and orderly manner. GFANZ work on identifying assets where managed phaseout could be appropriate and its review of potential financial mechanisms that could support managed phaseout. This is a complicated and significant aspect of the net zero transition for both countries and financial institutions.
  • Conversations around accelerating the clean energy transition amidst the Ukraine crisis, increasing financial flows for renewable energy to decarbonise the economy across OECD countries and EM&DCs. The spotlight will also be on the COP27 host continent Africa, who has significant renewable energy potential.
  • Further guidance on measuring portfolio alignment and recent recommendations made by the launch on climate data steering committee and the Climate Data Steering Committee on the launch of Net Zero Data Public Utility (NZDPU).

Carbon Tracker Expectations of GFANZ

We call on GFANZ to raise its level of ambition through the following actions:

  • Strengthening the set of requirements that financial institutions are expected to follow when it comes setting net zero targets and developing climate strategies. In particular, absolute emissions targets should be prioritised, as well as stringent rules around the use/application of carbon offsetting technologies.
  • Declaring its support for no new fossil fuel expansion, in line with climate science (IPCC, IEA) and latest analysis of the global energy market (IEA WEO 2022). As referenced in the ground-breaking set of recommendations provided to the UN Secretary General by the UN High Level Expert Group on Non-State Entity Net Zero Commitments, no new expansion includes new supplies of fossil gas and new LNG terminals, without any carveouts or exemptions[ix].
  • Linked to this, the GFANZ Managed Phaseout workstream currently focused on the retirement of coal assets should be expanded to consider the decommissioning of oil and gas assets that are at risk of being stranded by the energy transition. The steep declines in oil and gas demand reported in the IEA’s WEO highlight the need to consider the near-term retirement of oil and gas assets as well as coal assets.
  • More rapid mobilisation of private and blended finance to EM&DCs in order to stimulate the energy transition and climate solutions.


[i] Environmental Audit Committee, Oral evidence: The financial sector and the UK’s net zero transition, HC 308, Monday 24 October 2022, available online at https://committees.parliament.uk/oralevidence/11387/html/  https://committees.parliament.uk/oralevidence/11387/html/, accessed Friday 4 November 2022.
[ii] International Energy Agency, World Energy Outlook, available online at https://iea.blob.core.windows.net/assets/c282400e-00b0-4edf-9a8e-6f2ca6536ec8/WorldEnergyOutlook2022.pdf, page 133, accessed Monday 7 November.
[iii] International Energy Agency, World Energy Outlook, available online at https://iea.blob.core.windows.net/assets/c282400e-00b0-4edf-9a8e-6f2ca6536ec8/WorldEnergyOutlook2022.pdf, page 133, accessed Monday 7 November.
[iv] Carbon Tracker’s consultation response can be found on the Environmental Audit Committee’s website, available online at https://committees.parliament.uk/work/6734/the-financial-sector-and-the-uks-net-zero-transition/publications/written-evidence/, accessed Wednesday 9 November.
[v] For Carbon Tracker, Paris alignment means that the GHG reduction targets and Climate Mitigation Measures of the company help achieve the goals in Articles 2.1(a) and 4.1 of the UNFCCC’s Paris Agreement, most notably limiting global temperature increase to 1.5 degrees Celsius above pre-industrial levels.
[vi] These percentages are based on the 39 letter replies received by the EAC from financial institutions prior to the first oral evidence session, which took place on Monday 24 October.
[vii] Glasgow Financial Alliance for Net Zero, Towards a Global Baseline for Net Zero Transition Planning, available online at https://assets.bbhub.io/company/sites/63/2022/10/GFANZ_Towards-a-Global-Baseline-for-Net-Zero-Transition-Planning_November2022.pdf, accessed Friday 4 November.
[viii] Glasgow Financial Alliance for Net Zero, GFANZ Launches Critical Resources for Financial Institutions to Convert Net-Zero Ambitions to Actions, Calls on G20 Governments to Close Climate Policy Gap, available online at https://www.gfanzero.com/press/gfanz-launches-critical-resources-for-financial-institutions-to-convert-their-net-zero-ambition-into-action/ , accessed Friday 4 November.
[ix] United Nations High-Level Expert Group on the Net Zero Commitments of Non-State Entities, Recommendation 5: Phasing Out of Fossil Fuels and Scaling Up Renewable Energy, available online https://www.un.org/sites/un2.un.org/files/high-level_expert_group_n7b.pdf, page 23, accessed Wednesday 9 November 2022.