Climate change is the defining issue of the century; an existential risk and a code red for humanity. A rapid decarbonisation of our economies with global emissions decreasing by 7.6% every year is required to keep the Paris Agreement’s 1.5 degree goal within reach.

To achieve this goal will be incredibly challenging. We need an all-of-society approach to get there, with both public and private finance mobilising capital at scale to finance the transition. Estimates of how much the net zero ambition will cost range from around $100 to $150 trillion USD, cumulative over the next 30 years.

Mobilising capital on this scale is one of the core objectives at this year’s COP 26, which aims to keep 1.5 degrees within reach by unleashing the trillions in private and public sector finance required to secure global net zero.

This is also the drive behind the industry-led, UN-convened Net-Zero Banking Alliance, the banking element of the Glasgow Financial Alliance for Net Zero, which is designed to raise standards, and drive ambition across the financial sector using the criteria of the UN’s Race to Zero.

Through the Net-Zero Banking Alliance, a rapid, pivotal mobilisation of the banking sector is already underway with 92 banks representing US$ 66 trillion now firmly committed to a net zero future. This includes the top 10 largest banks by assets in Europe, the 10 largest in North America and 6 of the 10 largest in Latin America and the Caribbean. In Asia Pacific 3 of the 10 largest are committed, and 2 of the 10 largest from the Middle East & Africa, with member banks headquartered in 39 different countries.

Banks are a vital part of enabling the decarbonisation of the global economy. Through lending and investment decisions, banks can accompany and prompt their clients to accelerate the transition. The Alliance provides a global leadership community of banks that have committed to catalysing the decarbonisation of entire industries and sectors – from energy, agriculture and transport, to real estate and production of raw materials – in a transparent, credible and consistent way, in line with science.

At the core of the Alliance is its commitment statement, which provides a robust, ambitious and science-based framework to reinforce, accelerate and support banks’ decarbonisation plans. By becoming signatories to the Alliance’s commitment, banks agree to target a temperature outcome of 1.5 degrees, using no or low-overshoot climate scenarios. This means that the transition pathway cannot be heavily reliant on unproven negative emissions technologies, and must have a low or no overshoot of the global 1.5 degree temperature level.

Immediacy of action is generated by the commitment’s clear timeline, with banks prioritising carbon-intensive and high emitting sectors and setting their initial 2030 and 2050 targets within 18 months of signing, which will cover a significant majority of their financed emissions.

The commitment is also designed for full transparency and accountability. Each time a target is set, the signatory must report against those targets within 12 months, covering both absolute emissions and emissions intensity in their publicly-available reports. Within the same timeframe, members will publish a high level transition plan providing an overview of the actions expected to be undertaken to meet the targets and an approximate timeline.

The commitment is grounded in the UN-backed Race to Zero which has a robust entry process led by an independent group of academics and climate action experts, who review applications to check their level of rigor and robustness against the Race to Zero entry criteria.

What’s next?

COP 26 is only the beginning. The Alliance is now focused on supporting members on implementing their commitments and achieving their targets, providing a forum for banks to come together on technical developments such as carbon accounting, offsets, target-setting and scenarios. It will also focus on producing capacity-building pieces including sectoral guidance and position papers and developing common approaches by assessing tools, methodologies and best practice.

More on the Alliance |  More on GFANZ and Race to Zero

“Climate action tops the list of people’s concerns, across countries, age and gender. We must listen, we must act, and we must choose wisely.” António Guterres, UN Secretary General, COP 26 opening ceremony