As set out by the Intergovernmental Panel on Climate Change, unless we keep the global average temperature rise to well below 2°C, preferably below 1.5°C, the world may face unpredictable and severe damage to nature, economic growth, and social cohesion. This net-zero emissions transition will require significant investment – many trillions of dollars of new sustainable funding in the coming decades. Financial institutions have an important role to play. Beyond being responsible for emissions related to their own operational footprint, banks can act as climate partners engaging with individuals, corporations and governments, providing and channelling the finance needed to invest in new and sustainable business models.
Since launch in April 2021, the Glasgow Financial Alliance for Net Zero (GFANZ) has been developing tools and methodologies to support financial institutions’ efforts to turn net-zero commitments into real action. The 550+ members of the sector-specific alliances that comprise GFANZ have all committed to addressing the financial and economic risks and opportunities involved in achieving net zero. Translating these long-term commitments into action requires clear, detailed plans to help ensure the steps taken by the financial sector result in real-economy emissions reductions.
What is needed now is clarity for banks on how to build their net zero strategies, demonstrating that they have a robust approach and enabling external stakeholders to keep track of progress. This report, an output of the work programme HSBC has co-chaired in GFANZ, introduces the recommendations and guidance for ambitious and credible net-zero transition plans for financial institutions. It sets out a common framework that can be used as a resource globally across all types of financial institutions, to support greater comparability and to provide a shared understanding of the elements of a net-zero transition plan.
Net zero commitments may not be credible unless there is common ground on what the term means for banks in practice, and how to get there. The financial institution net-zero transition plan (FI NZTP) framework provides principles-based, globally applicable, pan-sector guidance that supports financial institutions in developing net-zero transition plans. The framework is underpinned by the view that delivering on net-zero commitments is only possible if transition planning aligns finance and related services with the reduction of GHG emissions in the real economy.
The transition plan framework in this report — consisting of five themes comprising ten components, provide resources and considerations for financial institutions on financing, investment, and financial services; measuring progress; and structuring governance of ambitious and credible transition plans. The framework structure of the five themes supports the provision of finance and related services to real-economy activities that advance the net zero transition. This report is not only designed to provide guidance to financial institutions to support their efforts to implement practical solutions, but also to the public sector to inform policies on transition planning.