G20 Urged to Build Net Zero Economy, Financial System at COP26

Carney-led coalition makes case for “clear, credible, and ambitious climate policies” from world’s largest economies.

The Glasgow Financial Alliance for Net Zero (GFANZ), a US$90 trillion finance sector coalition, has called on G20 leaders to rapidly reorientate their economies and the global financial system toward meeting the goals of the Paris Agreement.

Chaired by UN Special Envoy Mark Carney, GFANZ recommended a series of policy actions aimed at restructuring the global financial system and ensuring that public and private capital flows “are working hand in hand with public policy to accelerate the global transition to net zero, while ensuring a just transition for all”.

G20 leaders will hold their annual meeting directly ahead of the COP26 climate summit in Glasgow. A number of G20 countries, including China, India, Saudi Arabia and Turkey, have not yet submitted their final nationally determined contributions (NDCs), which outline their latest commitments and plans for achieving the goals Paris Agreement.

A report from the World Resources Institute recently found that global warming can be kept to 1.7 degrees by century-end, if Group of 20 countries alone commit to 2030 emissions reduction targets aligned with 1.5 degree net-zero 2050 pathways.

At present, the NDCs of all Paris Agreement signatories could lead to a temperature rise of 2.7 degrees by the end of the century, according to a report published last month by the UN Framework Convention on Climate Change.

“Greater and faster” action

GFANZ’s call for “greater and faster” action by G20 leaders covers a wide range of policy areas including economy-wide net-zero targets aligned to 1.5 degree Celsius pathways, reform of financial regulations to support the net zero transition, phase-out of fossil fuel subsidies, carbon pricing and mandatory net zero transition plans and climate reporting for public and private enterprises by 2024.

The coalition also called for G20 leaders to unlock the trillions of climate finance required to support developing economies meet the transition to net zero, work with farmers and businesses to stop illegal deforestation, provide viable alternatives and promote sustainable regenerative agricultural practices and increase support for a just transition that factors in the needs of employees, communities and smaller businesses in supply chains.

Carney said efforts by the private sector to mobilise the finance needed for global transition to a net zero economy had to be supported by “clear, credible, and ambitious climate policies” from G20 countries.

“The next few weeks in this decisive decade will help determine whether we avoid climate catastrophe. The core of the financial sector is stepping up – it’s time for major economies to do the same,” he said.

GFANZ was launched in April 2021 in partnership with the UNFCCC Climate Action Champions, the UN Race to Zero campaign and the COP26 Presidency. Serving as an umbrella body, its formation brought together several existing and new net zero finance initiatives into a single sector-wide coalition. It currently has around 300 members from 40 countries and collectively has approximately US$90 trillion in assets.

As members of the UN’s Race to Zero, GFANZ members have committed to transition their own investments and businesses to be net zero by 2050 at the latest and must use science-based guidelines to reach net zero emissions, cover all emission scopes, include 2030 interim target setting, and commit to transparent reporting and accounting in line with the UN Race to Zero criteria.

According to the FT, there is a lack of consensus among banks within the GFANZ coalition about the path to net zero and the speed with which it requires withdrawal from coal and fossil fuel financing.

Mandatory net zero disclosures

Separately, large UK companies and financial institutions responsible for over £4.5 trillion in assets asked the UK Chancellor of the Exchequer and Secretary of State for the Department of Business, Energy and Industrial Strategy to mandate disclosure of net-zero transition plans by large firms before COP26.

Signatories include FTSE 100 companies such as BT, Kingfisher, and Tesco, and financial institutions including Aviva, Legal & General Investment Management (LGIM), and Santander, as well as industry groups such as the Association of British Insurers (ABI) and the Aldersgate Group, and civil society organisations such as WWF.


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