GFanz dropping its Race to Zero requirement for members a ‘reality check’

DROPPING the mandate that members of the world’s largest coalition of financial institutions had to align with the Race to Zero criteria was a “reality check” exercise.

Despite the Glasgow Financial Alliance for Net Zero (Gfanz) — an umbrella organisation housing seven net-zero alliances in the financial sector — having regular monthly calls with representatives from the United Nations-backed global campaign, there was still a breakdown in communication, where banks found themselves unable to align with the Race to Zero’s updated entry criteria due to antitrust concerns, said Yuki Yasui, director of the Gfanz Asia-Pacific network. 

Speaking to The Business Times (BT) on the sidelines of the 27th United Nations Climate Change Conference, Yasui said that this episode highlighted some vulnerability in the governance between the net-zero alliances and the Race to Zero campaign. 

“Lots of banks felt that they wanted to determine their own future and their criteria, because it is after all a voluntary initiative. And so, the governance between Race to Zero and net-zero alliances was being questioned,” she said on Tuesday (Nov 8). 

The Race to Zero campaign, which rallies non-state actors to reduce their emissions, made explicit in June this year that its members had to “phase down and out all unabated fossil fuels”, which meant that Gfanz alliance members had to restrict the financing of new fossil fuel assets. 

It then updated its criteria again in September over legal concerns, and stated that members could find their own path to phase down and out unabated fossil fuel. 

But news reports emerged in October that some financial institutions were thinking of quitting the alliance, raising concerns that the financial sector was backtracking on its net-zero commitments. 

Mark Carney, the co-chair of Gfanz, has rubbished such talks and said that the change in membership rules reflected an evolution in its approach. 

Yasui told BT that the Race to Zero criteria was initially used as a membership requirement when Gfanz was formed last year, as net-zero was not yet well-defined in the industry. 

“We think today, with each of the net-zero alliances starting to have their own governance systems, it’s not necessarily easy for them to align themselves directly with Race to Zero if they have their own governance systems and changes,” she said. 

Instead, these alliances should decide independently whether to adopt the Race to Zero criteria without any pressure, though Gfanz still recommends members to comply. 

“We do want to raise the bar. But it has to be based on what each of the alliances are comfortable with,” Yasui added.