A coalition of the world’s biggest investors, banks and insurers that collectively control $130 trillion in assets said on Wednesday that they were committing to use that capital to hit net zero emissions targets in their investments by 2050, in a push that would make limiting climate change a central focus of most major financial decisions for decades to come.
The group, called the United Nations Glasgow Financial Alliance for Net Zero, is made up of 450 banks, insurers and asset managers in 45 countries. It said the pledge amounted to a transformation of the global financial system and would help businesses, financial firms and entire industries undergo fundamental restructuring for a carbon-neutral future.
“We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account,” Mark Carney, the former head of the Bank of England, who is leading the alliance, said in a statement.
The agreements are largely voluntary. But they show a commitment by a broad range of financial institutions — banks, insurers, pension funds, asset managers, stock exchanges, credit rating agencies, and audit firms — to have emissions slashed in the companies in which they invest, and to have their lending aligned toward the target of restricting a global temperature rise to 1.5 degrees Celsius above preindustrial levels.
The companies agreed to undergo a review every five years to measure how well they are hitting these targets. They also said they would report the emissions they finance ever year.
But critics said the pledges fell short because they don’t commit investors to stop placing money in fossil fuels.
“This announcement yet again ignores the biggest elephant in the room: fossil fuel companies,” Richard Brooks, the climate finance director of STAND.earth, an environmental group, said in a statement. “We cannot keep under 1.5 degrees if financial institutions don’t stop funding coal, oil and gas companies.”
“It sounds like a very impressive number,” said Sonia Hierzig, the head of financial sector research at ShareAction, a charity. “But not all of that will straight away go into green investment space.”
The $130 trillion is already invested in assets. To meet net-zero targets, financial firms will either need to cut emissions in the companies and projects they already invest in or divest and use the capital for new green investments.
“It’s still positive that at least there’s a recognition that we need to mobilize a large amount of money,” Ms. Hierzig said. But the charity has “a lot of question marks or concerns around some of the underlying initiatives,” for example, she added, the decision to allow asset owners to invest in coal plants that are already under construction.
The coalition was created in April and includes among its members the investment management company BlackRock, HSBC Holdings, Morgan Stanley and Deutsche Bank.
Critically, the initiative would create a new body to set standards for the climate-related goals and disclosures of investors and companies.
The alliance also said that nearly 40 central banks in countries generating two-thirds of the world’s emissions would introduce stress tests to gauge how financial firms are handling climate-related risks. Some, including the European Central Bank and Bank of England, plan to administer the stress tests to the banks they supervise early next year.
The alliance also pledged to scale more private capital flows to emerging and developing economies, which are among those facing the most brutal costs of climate change.
