Banks and Institutional Asset Owners Aim for Net Zero Emissions

G&A's Sustainability Highlights ( 10.15.2023 )
Nov 2, 2023 10:00 AM ET

The UN-Convened Net-Zero Asset Owner Alliance (NZAOA), formed in 2019, is a member-led initiative of institutional investors committed to transitioning their investment portfolios to net-zero GHG emissions by year 2050 – a tall order. The Alliance members’ near-term targets for carbon reductions are 20-32% reduction by 2025 and then 40-60% by 2030.

In advance of the upcoming COP28 summit in the United Arab Emirates next month, the Alliance released its third annual Progress Report. Institutional membership grew from 12 to 86 over the past year, boasting a total US$9.5 trillion AUM committed to the goals. Member organizations of the Alliance include signatories of the UN Principles for Responsible Banking (UN PRI), which has 300 signatory banks representing about half of the world’s banking industry.

Günther Thallinger, a Board Member of Allianz SE and Chair of the Alliance, said: “Alliance members are making solid progress towards achieving their 2025 emissions targets, showing that step-by-step, the crucial long-term transition to 1.5°C can be implemented.”

In its Progress Report, the Alliance calls on global policymakers to urgently implement several actions:

  • Scale up reforms of finance and investment policy frameworks
  • Implement overarching policies that integrate transition planning across all government entities
  • Continue efforts to reform the current multilateral financial architecture
  • Enable the just transition toward net zero

How are retail banks doing in setting sustainability strategies? Omdia, a global technology research and advisory group that tracks more than 11,000 companies, analyzed the scope of the retail banking industry’s sustainability strategies. Highlights of the research report, “Market Landscape State of Sustainability in Retail Banking,” include:

  • The “vast majority” of banks (85%) do not have a well-defined sustainability strategy that includes their supply chain
  • 45% of banks said keeping up with regulatory actions is challenging and is one of their top three priorities
  • Because so many businesses are still creating sustainability strategies, a key concern is that lack of a clear definition of “sustainability” is hampering retail banks’ efforts to implement it into their strategic objectives

While the progress of the Alliance is welcomed, how many of the claims made by members might be assured for accuracy by third parties to overcome natural skepticism by some critics? Citing the RepRisk firm’s tracking and research, Reuters reported that banks are behind a 70% jump in greenwashing incidents in 2023. European banks accounted for most of the greenwashing, and much of the claims were about fossil fuel. RepRisk cited misleading claims (greenwashing) vs. verified claims, with institutions making claims to boost their reputation and bottom line.

Our Top Stories include the third annual Progress Report of the UN-Convened NZAOA and the Omdia research results on sustainability in retail banking. The G&A team looks forward to keeping you updated on news and trends ahead of the important COP28 summit in November.

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.