INSIGHT by the Climate Policy Initiative
〉First tool to aggregate, standardize and assess progress of financial actors on actions beyond commitments
〉Data filtered by countries, actor type, and available at the level of individual institutions
〉Tool reveals some progress on making commitments, but less on implementation and impact
The most comprehensive tracking of global financial institutions’ net zero commitments and actions to date reveals mixed progress on reaching global climate goals.
Climate Policy Initiative (CPI) has launched a new Net Zero Finance Tracker (NZFT) to provide a comprehensive assessment of how private finance institutions are progressing on delivering net zero impact on the ground.
Valerio Micale, who leads development of the NZFT tool for CPI, said: “Since the Paris Agreement, many initiatives have been launched to galvanize climate action by financial institutions. It is now important to understand progress, implementation gaps, and inform the response of regulators and coalitions, who often struggle to make sense of the data.”
“The NZFT is a collaborative and interactive data platform that aims to assess how financial institutions are progressing on their climate commitments and delivering impact on the ground,” Micale added. “We achieve that by aggregating, standardizing and benchmarking data and information across multiple existing data efforts, hence our network with the various existing data initiatives is at the centre of this project.”
This edition of the NZFT platform covers 562 private financial institutions that are members of the Glasgow Financial Alliance for Net Zero (GFANZ), with combined assets of more than USD 80 trillion. The goal is to progressively expand coverage of entities across the financial system, and data used for the assessment. NZFT users can explore the dataset in aggregate, as well as by categories including country and actor type. They can also search by institution to learn about an individual institution’s progress on net zero.
Actions are tracked under three categories:
- Targets – signalling intent to respond on net zero;
- Implementation – measuring whether climate considerations are factored into decision-making processes; and
- Impact – assessing whether they are having an effect on the real economy.
The impact metric measures whether the actions of FIs are supporting investment in climate solutions, or whether they continue to drive finance to fossil fuel projects.
CPI Global Managing Director Barbara Buchner said: “As the world looks to the financial sector to strengthen net zero commitments, and to turn these into effective action with impact in the real economy, the NZFT is here to track progress based on many data sources. Knowing where some of the world’s largest financial institutions stand on their climate commitments can help us make better decisions to drive us closer towards meeting the goals of the Paris Agreement.”
| Key findings of the NZFT to date include:
〉Most GFANZ institutions are just starting to adopt broad net zero mitigation targets, but need to catch up on operational targets related to investment in climate solutions and divestment from fossil fuels are far less common.
〉Most observed action focuses on Climate Risk Management, Strategy and Disclosure as well as the adoption of Internal Accountability Frameworks. Almost all GFANZ institutions have committed to climate stewardship, but less than 20% have engaged in activities that clearly encourage net zero transition.
〉While green lending activities from GFANZ institutions observed an average annual increase of 30% between 2020 and 2022, exposure to fossil fuels remains significant.
〉Significant data gaps remain, and coordination between data providers is critical to ensure efforts focused on closing them. Further, we need metrics that can improve accountability of the financial system on the real economy
Explore the tool
| about
CPI is an analysis and advisory organization with deep expertise in finance and policy. Our mission is to help governments, businesses, and financial institutions drive economic growth while addressing climate change. Our vision is to build a sustainable, resilient, and inclusive global economy.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
