Ahead of the G20 Rome Summit this weekend, UN Environment Programme Finance Initiative (UNEP FI) today publishes its G20 input paper, ‘Recommendations for credible Net-Zero commitments from financial institutions’. UNEP FI is, for the first time, setting out a high-level framework for what a credible, transparent and comparable 1.5°C science-based commitment looks like and what it will mean for the real economy transition. By defining net-zero, the new guidance will help financial institutions achieve consistency in target setting and implementation of their net-zero goals.

“The purpose of these recommendations is not only to support financial institutions to credibly achieve net zero, but to catalyse change in the real economy. In the absence of a globally agreed framework, the voluntary leaders are making progress. However, we would like to see all banks, insurers and investors adopt the recommendations with support from members of the G20. The guidance, which is underpinned by the best available science, can be applied across all sectors of the global economy.”

Eric Usher, Head of UNEP FI

Financial institutions have a significant role to play on the journey to net-zero, despite being small emitters themselves. They are uniquely positioned to exert influence over real-world companies, and to monitor and finance the transition. While some financial institutions have chosen to divest from or not support high carbon sectors such as fossil fuels, this removes their ability to exert influence. Others continue to remain invested and to engage and lobby these firms around their climate plans, acting as stewards engaging the companies they own to transition to low-carbon business models. Without the milestones of a standardised and transparent framework benchmarking their progress, this can raise questions about motivations for their continuing financial relationship.

UNEP FI is calling for financial institutions to use a science-based definition of net zero – which means that all accumulated emissions over the next 30 years remain within the emissions budget required by 2050 as set out by the Intergovernmental Panel on Climate Change – and to use sector pathways to track different companies’ progress according to their industry sector. This will ultimately allow financial institutions to gain a holistic view of their alignment with a 1.5°C pathway and enable them to see whether they – and the real world companies within their portfolios – are on track to reach net-zero by 2050.

Reviewing and contributing to the recommendations were the Science Based Targets initiative (SBTi), the UN Global Compact and the Worldwide Fund for Nature (WWF) among others.

“As net-zero becomes a common threshold for climate ambition, these UNEP FI recommendations add to the urgent conversation around consistency and credibility. G20 policy makers and financial institutions can catalyze more effective private sector mitigation action by anchoring net-zero frameworks in climate science. The Science Based Targets initiative welcomes the inclusion of our Net-Zero Foundations and Corporate Standard in these recommendations and looks forward to working with UNEP FI and other stakeholders on developing a science-based net-zero target setting standard for financial institutions.”

Nate Aden, Senior Fellow, SBTi/WRI

The 11 recommendations include:

    • Align with science-based targets with no/low overshoot 1.5°C scenarios
    • Align as soon as possible and establish near-term (ideally 5-year) targets
    • Ceasing financing of new fossil fuel developments
    • Establish transparency regarding GHG emissions and their allocation to real economy inventories and strive for real economy impact
    • Establish an appropriate emission scope, striving for full coverage as soon as possible so that as data allows for the financial institution to also address Scope 3.
    • Finance the transition which also includes unlocking emerging technologies that will play a future role in the transition

The above recommendations appear as part of an input paper for the G20’s Sustainable Finance Working Group (SFWG) at this year’s G20. The paper was an input to the development of a G20 Sustainable Finance Roadmap released last week and endorsed by Finance Ministers and Central Bank Governors. The Roadmap sets out key priorities to scale up sustainable finance that supports the objectives the 2030 Agenda and the Paris Agreement, and lists actions for the G20 to take to promote the achievement of those priorities over the coming years.

Download the Recommendations for credible net-zero finance commitments here.

For more information, please contact Sally Wootton, UNEP FI’s Communications Lead.