gfanz portfolio alignment

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Date: 12/12/2022

The draft Glasgow Financial Alliance for Net Zero (GFANZ) Portfolio Alignment Measurement report is out. As the IFRS Foundation advances its work, there is an important continuing role for the TCFD in monitoring and reporting on take-up of its recommendations in the period until a global baseline standard is agreed and the implementation of that standard across jurisdictions begins to be monitored, it said. In connection with its latest annual status report, the TCFD today published an update to its2017 implementation guidance, which now includes a recommendation that investors and lenders disclose the alignment of their activities with a well-below 2C global warming scenario. Certain stakeholders pushed back against this in a subsequent consultation. The question is to what extent member institutions are willing to follow them and amend the PAMs they have in use accordingly. Previous guidance documents published by GFANZ. 685 1784 92. GFANZs hope is that by adhering to the gold standard design judgments, financial institutions and third-party providers will be able to produce decision-useful PAMs. Guidance has previously been published by GFANZ on sectoral pathways for transition for financial institutions. Should you use absolute emissions or intensity? This coalition now includes over 550 financial institutions committed to the goal of net zero greenhouse gas (GHG) emissions by 2050, in support . This site uses cookies. In this instance, GFANZ is reflecting the will of its signatories. GFANZ issued a report to provide guidance, clear definitions and case studies for financial institutions looking to develop and use portfolio alignment metrics to start decarbonizing their portfolios. On 8 August, the chairs of the Glasgow Financial Alliance for Net Zero (Gfanz) - Mark Carney, Michael Bloomberg and Mary Schapiro - released a statement welcoming the UN Race to Zero's new minimum criteria requiring associated members to get out of all unabated fossil fuels. NZIA members have committed to transition their insurance and reinsurance underwriting portfolios to net-zero greenhouse gas (GHG) emissions by 2050, consistent with a maximum temperature rise of 1.5C above pre-industrial levels by 2100, in order to contribute to the implementation of the Paris Agreement on Climate Change. The problem is that the evolution of these tools has outpaced efforts to organize, standardize, and validate them. Following the public comment period, GFANZ will release a final report prior to COP27 in Egypt. 43 banks from 23 countries (with assets of US$28.5 trillion) form the Net-Zero Banking Alliance (NZBA) today - which joins GFANZ - with its members committing to align operational and attributable emissions from their portfolios with pathways to net-zero by 2050 or sooner. (Bloomberg) -- Vanguard Group Inc. is walking out of the world's largest climate-finance alliance, marking the coalition's biggest defection to date as . 15 June 2022 was a big day for the climate finance community with announcements made by the UN-backed Race to Zero ("RTZ") campaign and the Glasgow Financial Alliance for Net Zero ("GFANZ").. Race to Zero campaign. GFANZ regularly publishes resources in the areas of financial institution net-zero transition plans, mobilizing capital for emerging markets and developing economies, and net-zero public policy. Members of the, This document is a concept note produced by a workstream of the Glasgow Financial Alliance for Net Zero (, focused on portfolio alignment metrics (including barriers to adoption, potential enhancements, and calling on financial, sector practitioners and metric providers to share use cases) (the , ). Welcome to IPE. | Terms and conditions | Privacy Policy | Cookie Policy, IEA: Renewable powers growth is being turbocharged as countries seek to strengthen energy security, European Union agrees law to fight global deforestation and forest degradation, Circular strategies could cut emissions from materials used in vehicles by 60% by 2040, WWF: Huge rise in demand for sustainable goods during Pandemic. | The Glasgow Financial Alliance for Net Zero (GFANZ) is a practitioner-led, global coalition of financial sector institutions and their sector-specific alliances. The launch press release boldly claimed that the "amount of finance committed to achieving 1.5C [is] now at [the] scale needed to deliver the transition". How should benchmark scenarios be selected? GFANZ is led by a Principals Group of business leaders representing major firms across the financial sector. This is especially important for those firms in the Glasgow Financial Alliance for Net Zero (GFANZ), the umbrella group of climate finance initiatives dedicated to decarbonizing the economy in line with the aims of the Paris Agreement. The Note has been provided for information purposes only and the information contained herein was prepared at the date, No representation, warranty, assurance or undertaking (express or implied) is or will be made, and no responsibility or, liability is or will be accepted by any member of GFANZ or by any of their respective affiliates or any of their respective. GFANZ is a global coalition of seven sector-specific (within the broader financial sector) alliances, with each alliance setting commitment criteria for its members. As the questions above illustrate, these issues are not without theoretical and practical challenges, and investors may reasonably disagree about the best approach. Mark Carney delivers the opening keynote at COP27 Finance Day, discussing how private sector finance will be essential to deliver the trillions of dollars needed to limit global warming to 1.5 degrees. Federated Hermes and GFANZ Keynotes, plus Building Open Source Portfolio Alignment Capabilities . In fact, in adraft versionof its 2021 implementation guidance, the group recommended that financial institutions measure and disclose the alignment of their portfolios consistent with a 2C or lower temperature pathway, a task arguably best suited for ITR-style PAMs. Asset managers need to figure out how to align membership of GFANZ with their fiduciary duty to clients, and fast. . We have a singular goal to maximize their long-term returns and give them the best chance for investment success as . Instead, it states that asset managers and asset owners should use whichever approach or metrics best suit their organisational context or capabilities. . GFANZ unveils enhancements to measuring Net-Zero portfolio alignment for financial institutions Now open for public comment, the GFANZ Portfolio Alignment Measurement Report provides additional guidance for financial institutions on implementing and selecting portfolio alignment metrics. The recommendation from the TCFD, for example, no longer states that investors should incorporate forward-looking alignment metrics into their target-setting frameworks and management processes. The members of the GFANZ Private Finance Working Group for Egypts Nexus for Water, Food & Energy (NWFE) express their strong support for the Government of Egypts (GoEs) ambitious plan for energy transition via NWFE. Sign up to receive our newsletter and stay updated on the latest GFANZ news and events. GFANZ itself finalised its work on the key area of "Portfolio Alignment Management", "supporting the development and effective implementation of Portfolio alignment metrics for financial institutions and driving convergence in the way portfolio alignment is measured and disclosed. GFANZ does not make the same mistake as the TCFD by declaring a preference for one PAM over another. Guidance / Tool - 2020 As an increasing number of countries legislate for net zero, investors and lenders will need tools to identify risks and opportunities in the transition to a net zero economy. Manifest Climate Inc. 160 Bloor Street East, Suite 1010 Toronto, ON M4W 1B9, Manifest Climate Inc. - New York 127 W 30th Street, 9th Floor New York, NY 10001, hello@manifestclimate.com +1 (877) 762 6433, GFANZ Wants to Whip Portfolio Alignment Metrics into Shape, Want climate insights delivered right to your inbox? Nothing in this Note constitutes an offer or a solicitation of an offer to buy or sell any securities or financial instruments or. GFANZ is not a standard-setter, though, and its influence depends on the support of its member institutions. ITRs are a relatively new tool and have been the subject of heated debate, although they are being used by organisations such as AXA and Japans Government Pension Investment Fund. GFANZ provides the tools and resources the financial sector needs to implement its net-zero commitments. Thanks to all 50+ organizations who engaged with us to get the report to this stage, as well as the technical leadership of Anja Ludzuweit, CFA, and with the support of Edward Mason and David Blood. Announcement made on the expanded partnership with Bloomberg Philanthropies to support developing countries across Africa, Asia, and Latin America to accelerate coal phaseout. These publications aim to support financial institutions in developing and implementing credible, high-ambition strategies for achieving net zero. Alienate them by imposing unwanted standards and the alliance could break apart. Thanks to all 50+ organizations who engaged with us to get the report to this stage, as . For instance, the report notes that benchmark divergence metrics are [c]omplex to use and interpret, are not meaningful to aggregate at the portfolio level, and that their decision-usefulness is highly dependent on an appropriate level of scenario granularity by sector and geography. This suggests its a flawed metric for conducting the kind of portfolio-level analysis GFANZ members are keen on. However, it wasnt very long ago that the Task Force on Climate-related Financial Disclosures (TCFD) the premier framework for climate risk reporting appeared tofavor the widespread use of ITRsover other kinds of metric. Following the consultation, the TCFDpared back its support for ITRs, and simply recommended that financial institutions use whichever approach or metrics best suit their organizational context or capabilities to show their alignment with a well below 2C scenario. This consultation report outlines how portfolio alignment metrics are used today and seeks feedback on guidance and enhancements to critical inputs for measuring portfolio alignment. Other changes made by PAT included adding a suggestion that investors use 1.5C scenarios for their alignment activities, and that they follow Science-Based Targets initiative standards on scenario choice as minimum criteria. Summary: Hear from our keynote speakers about the importance of aligning portfolios to Net Zero targets. National leaders in Africa and other parts of the developing world are sure to press GFANZ in Sharm El Sheikh to support specific climate-protection projects in their respective countries. This report details the progress GFANZ has made in 2022 under our program of work to support financial institutions in operationalizing their net-zero commitments, accelerate capital mobilization to EM&DEs, and advocate for credible policies and standards to enable net-zero transition across the globe. Hundreds of science-based interim targets have been published by firms. The draft Glasgow Financial Alliance for Net Zero (GFANZ) Portfolio Alignment Measurement report is out. 5 And the first targets have also been published by Net Zero Banking . The workstream was supported, by the GFANZ Secretariat. 2 min read. There is currently a proliferation of PAMs being used, which impedes on the financial sector's ability to accurately assess the progress and risk of their portfolios in the context . Speakers: Saker Nusseibeh, David Blood, Leyla Javadova, Bert Kramer, Jared Westheim, Girish Narula, Jaakko Kooroshy, Maarten Vleeschhouwer, Margaret Kuhlow . It all sounds good in theory, but in practice, the whole endeavor is tremendously complicated. The consultation report's proposed enhancements aim to address current gaps and accelerate progress toward the wider adoption of portfolio alignment metrics among financial institutions . Despite the work of Race to Zero, GFANZ, and its affiliated alliances to create Paris-aligned science-based goals of net zero by 2050, with their updated criteria, the group has come under fire from both members and environmental activists and was still accused of greenwashing. Portfolio alignment Finally, GFANZ has today released a guide to portfolio alignment for net zero. Certain metrics are, after all, more difficult to put together than others. More than 100 financial institutions have joined GFANZ through the sector-specific alliances. That is why we support the TCFD-commissioned work on portfolio alignment tools, presented in the PATs report published today, he said. Thanks to all 50+ organizations who engaged with James Davis auf LinkedIn: GFANZ-Portfolio-Alignment-Measurement-August2022.pdf GFANZ calls for portfolio alignment feedback To access this article please sign-in below or register for a free one-month trial. Mary Schapiro, Vice Chair of GFANZ, said Growing global scrutiny of transition plans makes the need for business action on climate ever more urgent, If financial institutions are to deploy the capital required to usher in the net-zero transition, they need a way to measure whether their financing activities align to their ambition.. GFANZ's proposed framework consists of three "conceptual steps": translating net zero-aligned and scenario-based carbon budgets into benchmarks, assessing company-level alignment against such benchmarks based on cumulative emissions, and aggregating company-level alignment at the portfolio level. This being the case, a keep it simple, stupid approach may be unhelpfully reductive. Third-party vendors have also built specialist products to meet the growing demand for PAMs. Recommendations like these are supposed to help bring about the convergence around best practices the alliance is looking for, and foster some degree of PAM standardization. The final PAT report and TCFD recommendation incorporate some key changes in response to consultation feedback. This 50% by 2030 cut is a key part of the . This suggests it's a flawed metric for conducting the kind of portfolio-level analysis GFANZ members are keen on. After all, a single type of PAM used industry-wide would make it easier to assess the financial systems overall alignment with net-zero goals. For some firms it would be risky to change their metrics to align with GFANZs answers to the key design judgments. An update on Vanguard's engagement with the Net Zero Asset Managers initiative (NZAM) December 07, 2022. or implied in the Note is intended to create legal relations and the Note does not create legally enforceable obligations. Out of a desire to quickly re-align its portfolio with 1.5C, the fund may choose to rapidly divest from those companies with high Scope 3 emissions, catalyzing a fire-sale that ripples through financial markets. In order to ameliorate PAM transition risk, meanwhile, institutions could be advised to publish standardized, backward-looking metrics alongside their PAMs that adhere to a simple, standardized methodology. However, promoting the whole gamut of PAMs may not best serve the overarching mission of the alliance. GFANZs practitioner-led guidance has been developed based on input from net-zero stakeholders, including financial institutions, financial data providers, and civil society. Alongside the development and implementation of their own net-zero transition plans, financial institutions require resources to measure their portfolio companies net-zero progress. Background on GFANZ and the Report. New regional network with central office in Singapore will support expansion of net-zero finance in Asia-Pacific and help accelerate the regions transition to a net-zero economy. Another change was adding that portfolio alignment disclosures include statements about uncertainty related to methodology, data and scenarios, and the reasons for scores changing following methodological, data or scenario improvements. The RTZ announced an update to its membership criteria.The RTZ is a coalition of over 10,000 businesses, financial institutions, and government bodies worldwide that was . What may be lost in terms of accessibility and the ability to easily compare portfolio alignment across firms would be more than made up for through greater transparency. accounting, financial or other advice, has been provided by GFANZ and has not been independently verified by any person. How should emissions baselines be quantified? However, in its guidance GFANZ does try to nudge institutions toward specific answers. On Tuesday, it published areport on portfolio alignment metricsthat includes guidance for designing and implementing effective PAMs. As a result, this guidance enables financial institutions to better measure how aligned a portfolio or lending book is with net-zero objectives. crosscutting issues that will accelerate the alignment of financing activities with . Institutional Investors Group on Climate Change, GFANZ would like to thank all those who have contributed to our work and development of this report. The draft Glasgow Financial Alliance for Net Zero (GFANZ) Portfolio Alignment Measurement report is out. Visit our Publications section to review and download our reports. The Glasgow Financial Alliance for Net Zero (GFANZ), proposed new and enhanced guidance on measuring the alignment of financial institutions' investment, lending, and underwriting . However, if the PAM were amended to incorporate Scope 3 emissions the metrics output may show it is actually closer to a 2C or even 3C warming trajectory. This webinar will discuss the August GFANZ Portfolio Alignment report, which provides a practitioner perspective for measuring the alignment of investment, lending, and underwriting activities with the goals of the Paris Agreement and critical 2050 global net-zero objectives. GFANZ has marked a path to improving PAMs that may require some financial institutions and metrics vendors to go back to the drawing board when it comes to their own portfolio tooling. The report aims to drive adoption of portfolio alignment metrics and meaningful convergence . . How should alignment be expressed as a metric? This report details the progress GFANZ has made in 2022 under our program of work to support financial institutions in operationalizing their net-zero commitments, accelerate capital mobilization to EM&DEs, and advocate for credible policies and standards to enable net-zero transition across the globe. GFANZs big challenge, therefore, is to find ways to cajole member institutions into embracing its guidance while minimize this kind of PAM transition risk. One way to address the first half of this problem would be to encourage better disclosure around PAMs, so that financial institutions and metric providers have to explain their choices against the nine key design judgments. This would help identify flawed PAMs and give stakeholders the evidence they need to push for changes. Alignment with the UN's Race to Zero adds further constraints. Though this may be a tough process for some institutions, it promises to be worthwhile both for them and the wider net-zero financial system. For its part, the TCFD today also released new guidance for companies to disclose their plans for a net-zero transition in line with the Paris Agreement, including disclosure of seven categories of cross-industry metrics like Scope 1, 2 and 3 greenhouse gas (GHG) emissions. "Portfolio alignment metrics are a really significant tool for investors as they pursue their net-zero goals." Bringing together the financial sector to accelerate the transition to a net-zero economy. This may result in more lengthy disclosures. 4 days ago 9 min read. One year ago at COP26 in Glasgow, ex-governor of the Bank of England Mark Carney announced that more than $130trn (109.54trn) of private capital had been committed to net zero under his landmark initiative, the Glasgow Financial Alliance for Net Zero ().This was a strong sign that financial institutions were ready to take responsibility for their impact on climate change, and GFANZ has only . "To measure portfolio alignment, financial practitioners should consider nine key decisions, the key design judgements," said Anja Ludzuweit, executive director of portfolio alignment measurement for GFANZ. The workstream was supported by the GFANZ Secretariat. In light of GFANZ's recent decision to downgrade its ties with the UN Race To Zero Campaign, it is positive to see co-chairs Michael Bloomberg and Mark Carney, and vice-chair Mary Schapiro, stressing the need to halve CO2 emissions by 2030 in the foreword to their detailed report giving guidance on financial institution net-zero transition plans. What scope of emissions should be included? An Advisory Panel of NGOs and technical organizations ensures that GFANZs work is held to the highest standards of ambition while keeping climate science at the heart of everything GFANZ does. 3233596, VAT No. Green Finance Briefing: GFANZ moves a step ahead on net zero portfolio alignment. Glasgow Financial Alliance for Net Zero (GFANZ) | 3,586 followers on LinkedIn. The report aims to drive adoption of portfolio alignment metrics and meaningful convergence . According to Campden Wealth and Raffles Family Office's Asia-Pacific Family Office Report 2022, 42% of family offices are now engaged in sustainable investing, with 29% of their portfolios dedicated to sustainability (up 4% from 2021 and 2% higher than the global average). The lack of transparency around financial institutions' Net Zero targets and disclosures for portfolio alignment leaves a big opportunity for greenwashing. Sign up to receive free and essential industry news and updates, delivered direct to your inbox, 2022 Climate Action. Every company, bank, insurer, and investor will need to adjust their business models, develop credible plans for the transition to a low-carbon, climate-resilient future, and then implement those plans. members to increase their ambition over time. This report provided a critical assessment of the strengths and trade-offs of the options available to measure the alignment of financial portfolios with climate goals. Oliver Wyman provided knowledge and advisory support. Asset manager says feedback misrepresents, or risks misrepresenting, implied temperature rise metrics, Investors involved with Transition Pathway Initiative raise concerns about series of undesirable consequences, Government says Sustainability Disclosure Requirements to cover corporates, financial services firms, and pension schemes, New investments will focus on decarbonisation, the digital revolution, and emerging markets, Plus:BlackRocks LifePath UK adopts formal ESG policy, High inflation, central banks bumping up interest rates, and prospects of recessions in the US and in Europe have had an impact, Copyright 19972022 IPE International Publishers Limited, Registered in England, Reg No. Vanguard Quits Net-Zero Climate Group, Marking Biggest Defection Yet . Further guidance on measuring portfolio alignment and recent recommendations made by the launch on climate data steering committee and the Climate Data Steering Committee on the launch of Net Zero Data Public Utility (NZDPU). For the avoidance of doubt, nothing express. Over 90 of the founding institutions of GFANZ have already delivered on setting short-term targets, including 29 asset owners that have committed to reducing portfolio emissions by 25-30% by 2025, as well as 43 asset managers that have published targets for 2030 or sooner. Portfolio alignment metrics are a really significant tool for investors as they pursue their net-zero goals.. The draft Glasgow Financial Alliance for Net Zero (GFANZ) Portfolio Alignment Measurement report is out. Implied Temperature Rise from MSCI ESG Research is an intuitive, forward-looking metric, expressed in degrees Celsius, designed to show the temperature alignment of companies, portfolios and funds with global temperature goals. GFANZ will be at COP15, the 2022 UN Biodiversity Conference taking place in Montreal, Canada. commit to forcing portfolio companies to "align[] political lobbying with the Paris Agreement," without . Climate Capital Where climate change meets . The report, the PAT said, aims to foster convergence of approaches around 26 best practice recommendations, and increase the transparency of methodological choices. "To measure portfolio alignment, financial practitioners should consider nine key decisions, the key design judgements," said Anja Ludzuweit, executive director of portfolio alignment measurement for GFANZ. This growth is expected to increase to 50% over . (GFANZ), a Carney-led coalition, "as the natural place to take guidance on portfolio alignment metrics . The draft Glasgow Financial Alliance for Net Zero (GFANZ) Portfolio Alignment Measurement report is out. Review the list of activities GFANZ will be participating in at COP15 with the latest announcements, speeches, and events as they happen. governor who is the chief architect of GFANZ, said earlier this year the alliance has enjoyed . Content Tags: Portfolio Management Transition Emissions GFANZ regularly publishes resources in the areas of financial institution net-zero transition plans, mobilizing capital for emerging markets and developing economies, and net-zero public policy. The Transition Pathway Initiative, for instance, argued that the TCFDs endorsement of ITRs would create pressure on investors to invest time and effort in providing such disclosures. Others spoke out against what they saw as the TCFDpicking winnersin the blossoming competition among PAM providers. allowance for whether such an alignment would be in the financial best interests of the company.14 The nature of our legislative process produces carve outs, exceptions, delays, or exemptions, any of which . The Glasgow Financial Alliance for Net Zero (GFANZ) is a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy. Lombard Odier convened a NCIA and Circular Bioeconomy Alliance event on the subject of "Investing in Nature at Scale". . The 2021 PAT report identified three key categories of portfolio alignment metrics tools to support financial institutions' efforts: Binary target measurements measure the alignment of a portfolio with a given climate outcome based on the percentage of investments or counterparties in a portfolio with net-zero, Paris-aligned targets. A GFANZ spokesperson confirmed the change in requirements to RI and said: "GFANZ and the sector-specific alliances will continue to note the advice and guidance from Race to Zero, as well as other international bodies, such as the UNFCCC, IPCC, IEA, the G20's Financial Stability Board, and the UN's High Level Expert Group on net zero." A group of experts established by Mark Carney, in his capacity as UN special envoy for climate and finance, has finalised best practice guidance on portfolio alignment metrics to support a new recommendation for investors from the Task Force on Climate-related Financial Disclosures (TCFD). interested party or its advisers in connection with this Note. It provides useful technical hints to help asset owners think how to measure investment-related climate neutrality, and will reduce the risks of greenwashing associated with loosely defined ITR models.. Banks, asset managers, asset owners, and insurers want PAMs because they can show how in-sync their portfolios are with global climate goals. This requires forward looking, robust, decision useful and comparable metrics. 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Measuring Portfolio Alignment: Enhancement, Convergence, and Adoption aims to offer guidance on multiple technical aspects, structured around 9 'key judgments'. How do you aggregate counterparty-level metrics into a portfolio-level score. Portfolio alignment Finally, GFANZ has today released a guide to portfolio alignment for net zero. When you consider the disclosure around transition plans, a lot of that will capture Scope 3 emissions as well, so we think were narrowing the universe of companies that wont also be disclosing Scope 3, MarySchapiro, head of the TCFD and vice chair for global public policy at Bloomberg L.P., told journalists yesterday. Still, while it does not favor one metric over another GFANZ does highlight the pros and cons of each PAM, perhaps to nudge institutions towards what the evidence suggests are the higher-quality and more decision-useful versions. Paris, June 22, 2022 - As part of its "Ambitions 2025" plan presented this morning (1), Crdit Agricole announced decarbonisation targets for the automobile and oil and gas sectors. Published on: 12 Aug, 2022, 3:56 am. The hard truth is that mapping financial portfolios onto desired climate futures is complex, and the output of PAMs will always be plagued by uncertainty. The guidance itself is organized around a conceptual framework established by thePortfolio Alignment Team, a group of climate finance professionals who published reports on designing effective PAMs in 2020 and 2021. GFANZ proudly announced its members were already aligning their portfolios with 1.5C; 90 of its founding institutions had already set short-term climate targets, including 29 asset owners committed to reducing portfolio emissions by 25-30% by 2025. Many of these institutions have experimented with PAMs as way of honoring their commitment to the alliance and to mark their progress toward its overarching objective. Together, they work to accelerate the world's transition to . Achieving the objective of the Paris Agreement to limit global temperature increases to 1.5C from pre-industrial levels requires a whole economy transition. More than 30 million individual investors around the world have chosen to entrust Vanguard with their hard-earned savings. The draft Glasgow Financial Alliance for Net Zero (GFANZ) Portfolio Alignment Measurement report is out. All Rights Reserved. Source: GFANZ . But firms seem to be moving in this direction anyway, given their professed preference for climate dashboards that include multiple PAMs and backward-looking metrics. Industry-wide, they could disrupt the flow of capital toward the net-zero economy in the process elevating the likelihood of a disorderly transition, which could bring systemic risks in its wake. Wie hat sich unsere Natural Capital"-Strategie inmitten der Paradigmenwechsel im Finanzwesen und in der Wirtschaft, die sich seit Lancierung der Strategie vor zwei Jahren vollzogen haben, bewhrt, und welche naturvertrglichen" politischen Massnahmen haben das Thema gestrkt? 2022 Glasgow Financial Alliance for Net Zero. "It's a hugely exciting moment that this work is now being carried on within GFANZ," said Edward Mason, director of engagement at Generation Investment Management and staff lead for the portfolio alignment workstream in GFANZ. Read our policy. Thanks to all 50+ organizations who engaged with us to get the report to this stage, as well as the technical leadership of Anja Ludzuweit, CFA, and with the support of Edward Mason and David Blood. Given this, the fact that no single metric dominates the space is not surprising. Oliver Wyman provided knowledge and advisory support. 11 August 2022 Press Release This could be addressed with better guidance on portfolio alignment metrics, as contained in a recent Glasgow Financial Alliance for Net Zero (GFANZ) report. Following the public comment period, GFANZ will release a final report prior to COP27 in Egypt's Sharm el-Sheikh this autumn. GFANZ Technical Lead - Portfolio Alignment Measurement (Contract) Bloomberg LP New York, NY 3 weeks ago Be among the first 25 applicants in support of a net-zero climate transition. The Portfolio Alignment Team (PAT) issued a report in 2020 titled Measuring Portfolio Alignment: Assessing the Position of Companies and Portfolios on the Path to Net Zero. The report aims to drive adoption of portfolio alignment metrics and meaningful convergence . 2022 CONCEPT NOTE ON PORTFOLIO ALIGNMENT MEASUREMENT, This report was developed by the GFANZ workstream on Portfolio Alignment Measurement with input, from the GFANZ Principals Group, Steering Group, and Advisory Panel. Thanks to all 50+ organizations who engaged with us to get the report to this stage, as well as the technical leadership of Anja Ludzuweit, CFA, and with the support of Edward Mason and David Blood. . The report proposes and seeks guidance on portfolio alignment use . officers, employees, agents or advisers in relation to the adequacy, accuracy, completeness or reasonableness of this Note, or of any other information (whether written or oral), notice or document supplied or otherwise made available to any. Here he argues, with Dominic Tighe and Tanguy Sn who are members of the portfolio alignment team, that by establishing standards of best practice, the Portfolio . Firms could also disclose their portfolio alignment under old and new iterations of their chosen PAMs side-by-side to head off accusations of greenwashing. This report brings much-needed consistency on metrics and data points required by global financial institutions to evaluate the progress and credibility of companies net-zero transition plans. GFANZ said the report includes "new and improved guidance to measure the alignment of financial institutions' investing, lending and underwriting activities towards net-zero commitments." It added that it was gathering feedback on proposed improvements to measure whether investment portfolios are targeting net zero. The information in this Note, which does not purport to be comprehensive, nor render any form of legal, tax, investment. supporting the creation of frameworks and metrics needed to measure portfolio and sectoral net zero alignment; and; . Download the report (updated as of 9 November 2022). Building upon the implementation of sound financial sector and real-economy transition plans as well as science-based net-zero pathways, GFANZ's Portfolio Alignment Measurement Report will help financial institutions use metrics to assess whether their portfolio companies are 1.5 degrees C-aligned or need resources to transition." Carbon Tracker Expectations of GFANZ. . The PAT will now be disbanded and transfer its work to the Glasgow Financial Alliance for Net Zero (GFANZ), a major finance sector coalition representing over $90trn (77.5trn) of assets across banks, investors and others. GFANZ members have signed up to the ambitious commitments of their respective sector-specific alliances and are not, automatically expected to adopt the principles and frameworks communicated within this report, although we expect all. Now open for public comment, the GFANZ Portfolio Alignment Measurement Report provides additional guidance for financial institutions on implementing and selecting portfolio alignment metrics. A fund that has been using a PAM that only considers Scope 1 and 2 emissions for these sectors may today be able to show that its portfolio is aligned with a 1.5C pathway. 2022 CONCEPT NOTE ON PORTFOLIO ALIGNMENT MEASUREMENT 2 Acknowledgements This report was developed by the GFANZ workstream on Portfolio Alignment Measurement with input from the GFANZ Principals Group, Steering Group, and Advisory Panel. Sign up for our newsletter today. GFANZ is a coalition of financial institutions which have committed to aid the transition the global economy to net - zero greenhouse gas (GHG) emissions. Thanks to all 50+ organizations who engaged with us to get the report to this stage, as well as the technical leadership of Anja Ludzuweit, CFA, and with the support of Edward Mason and David Blood. The measures announced are a first step towards phasing out the oil and gas sector, but will not be enough to allow Crdit Agricole to fully contribute to the objective of limiting global . In a similar vein, the PAT amended its recommendations regarding tool choice to ensure these did not suggest that all institutions move towards an implied temperature rise (ITR) metric in the long term. Hence the buzz over portfolio alignment metrics (PAMs) the measurement systems firms can use to understand what investment, lending, and underwriting activities support a 1.5C warming pathway. Investors can use Implied Temperature Rise to set decarbonization targets and support engagement on climate risk. Taming the metrics zoo, therefore, is no small matter. GFANZ issues draft statement on the Country Platforms model for increasing capital for emerging markets and developing economies (EM&DEs). GFANZ is seeking feedback on the guidance and enhancements to critical inputs for measuring portfolio alignment by 12 September. For example, on the first judgment what type of benchmark should be built? GFANZ proposes that firms use a single-scenario benchmark built using a fair-share carbon budget approach where possible, and a convergence-based approach if not. Doing so would provider stakeholders with a fallback disclosure they can use to anchor their understanding of the forward-looking PAMs. 3 min read. Portfolio alignment tools have an important role to play in the target-setting process, in that they can provide input on what needs to be done in order to align a portfolio with the goals of the Paris Agreement in the intermediate term (e.g., on the way to net-zero), given its unique economic composition. GFANZ further pledged to deliver as much as $100 trillion in financing to help emerging economies transition to net zero over the next three decades. The Glasgow Financial Alliance for Net Zero (GFANZ), the worlds largest coalition of financial institutions committed to transitioning the global economy to net-zero greenhouse gas (GHG) emissions, proposed new and enhanced guidance on measuring the alignment of financial institutions investment, lending, and underwriting activities with net-zero commitments. To measure progress against their net-zero commitments and reallocate capital to support the transition to a net-zero economy, financial institutions need credible, forward-looking metrics to help them determine the climate alignment of the companies within their portfolios. The report aims to drive adoption of portfolio alignment metrics and meaningful convergence . Michael R. Bloomberg, UN Special Envoy on Climate Ambition and Solutions, and Mark Carney, UN Special Envoy for Climate Action and Finance, serve as GFANZ Co-Chairs, and Mary Schapiro serves as the Vice Chair and Head of the Secretariat. For example, GFANZ recommends in respect to judgment 4 what scope of emissions should be included? that Scope 3 emissions be factored into company-level alignment for certain priority sectors, including oil and gas and electric utilities. Login Username (email address) Password New pan-sector framework for financial institution transition planning supports actionable strategies and unprecedented accountability on net-zero commitments. The chairs were referencing a June update from Race to Zero, an influential coalition promoting net zero and . Is GFANZ Greenwashing? . This framework consists of nine key design judgments specific questions that financial institutions and metric providers should consider when building PAMs and best practice recommendations for answering each one. GFANZ issues a guidance document for consultation with the aim to enhance, converge, and adopt international best practices for portfolio alignment metrics (PAMs). Advisory Panel of 20 independent experts from around the world, and the 7 NGOs that convene the sub-sector alliances of GFANZ. MSCI and Moodys are two major players in this space. Vanguard, one of the largest investment managers in the world, announced today that it is withdrawing from the Net Zero Asset Managers initiative (NZAM), a major multi-trillion dollar group of investment managers committed to supporting the goal of net zero greenhouse gas emissions by 2050. It continues to encourage Scope 3 emission disclosures, but says this is subject to a materiality assessment. Its a hugely exciting moment that this work is now being carried on within GFANZ, said Edward Mason, director of engagement at Generation Investment Management and staff lead for the portfolio alignment workstream in GFANZ. Gfanz responded by weakening its alignment with UN climate goals that called for members to roughly halve the emissions they are responsible for by 2030. The simplest such metric for this purpose may befinanced emissions, presented according to the Partnership for Carbon Accounting Financials methodology. The alliances goal is to bring about convergence on best practice, improve the transparency on the assumptions that underpin PAMs, and broker agreement on their methodological frameworks. Still, financial institutions want to plot a course to its coolest fringes. How should forward-looking emissions be estimated? The guidance itself is organized around a conceptual framework established by the Portfolio Alignment Team, a group of climate finance professionals who published reports on designing effective PAMs in 2020 and 2021. The TCFD is now saying that absolute Scope 1 and 2 GHG emissions should be disclosed regardless of materiality. Clear guidance can help to advance best practices on portfolio alignment methods and the range of portfolio alignment metrics used. Our climate future is unknown territory. Covering the financial gamut, GFANZ has seven sector-specific alliances to "drive progress at the grassroots level to raise the ambition on net-zero commitments, increase engagement, and support their members' acceleration of their alignment journeys." Each alliance operates under the same goalnet zero emissions by 2050 or sooner. As a result, there now exists an exotic menagerie of PAMs addressing various use cases and built using all kinds of forward-looking methodologies. GFANZ (Glasgow Financial Alliance for Net Zero) was announced with great fanfare at COP26 in Glasgow, and now boasts 450 members with $130 Trillion in assets under management. This workstream will support the development and adoption of portfolio alignment metrics and drive convergence in the way portfolio . GFANZ is working to change this. By Blake Goud. Its a long list of questions, and there are multiple credible responses for each one. Given that GFANZ counts the world's three largest fossil fuel financiers JPMorgan Chase, Citi and Bank of America among its members, achieving a 50% reduction in seven years almost certainly requires retirement or active environmental management of existing carbon-intensive investments, and definitely a stop to new investments in such assets. One key GFANZ workstream is portfolio alignment measurement. Press Release. Portfolio > Asset Managers. In a statement announcing the withdrawal, Vanguard . GFANZ launched in April last year in a drive to unite the global financial sector in transitioning to net-zero portfolios by 2050. Course Hero is not sponsored or endorsed by any college or university. On August 2022, GFANZ issued a guidance document for consultation with the aim to enhance, converge, and adopt international best practices for portfolio alignment metrics (PAMs). We need "a whole economy transition," as the GFANZ materials puts it, where "every company, bank, insurer and investor will have to adjust their business models, develop credible plans for the. Today GFANZ includes over 450 financial institutions representing assets of more than $130 trillion across 45 countries. Author: Portfolio Alignment Team Industry Group: Financial. Accompanying the TCFDs publications today is the final report from the Portfolio Alignment Team (PAT), which was established by Carney in 2020 to catalyse progress in the analysis and use of portfolio alignment metrics. The reports proposed enhancements seek to address current gaps in portfolio alignment metrics and accelerate progress toward the wider adoption of portfolio alignment metrics among financial institutions that are committed to supporting a science-aligned net-zero transition by 2050. We call on GFANZ to raise its level of ambition through the following actions: At COP26, the group revealed it now represented more than $130trn in assets under management. Registered Office: 1 Kentish Buildings, 125 Borough High Street, London SE1 1NP, Asset Class Report - Equities (December 2022), Country Report - Pensions in the Nordic Region (December 2022), in 2020 to catalyse progress in the analysis and use of portfolio alignment metrics, IFRS Foundations work to develop a baseline global sustainability reporting standard, Glasgow Financial Alliance for Net-Zero (GFANZ), Task Force on Climate-Related Financial Disclosures, Lombard Odier challenges TPI, 2DII responses to TCFD metrics consult, UK asset owners warn TCFD about portfolio alignment proposals, UK reveals plan for economy-wide climate impact reporting regime, Border to Coast adds 2.2bn to second private markets programme, Church Commissioners to vote against companies failing on humans rights, Migros Pensionskasse posts -6% returns, only real estate positive, Print advertising rates and specifications, Digital advertising technical specifications (pdf). On the contrary, the report explains that many firms do not want to limit themselves to a single metric, but prefer instead a dashboard approach which makes use of a variety of backward- and forward-looking metrics. GFANZ 2022 Progress Report. Pascal Christory, group CIO at AXA Group, said the metric enabled it to identify transition models and their impact on climate change, but that the ITR metric needed methodological convergence. 11 GFANZ, Our Progress . My portfolio value in July 2020 was identical to a year earlier, but life was much less pleasant due to the emergence of COVID-19 and all that meant. GFANZ makes a start on this task by sorting PAMs into four categories: The variety of PAMs in circulation reflects the range of use cases they serve, as well as the dispersion of technical skills and climate data availability across institutions. The goal is to bring together the best thinking from across the system to accelerate progress . GFANZ members commit to $130tn for Paris alignment Mark Carney, UN special envoy on climate, announcedthat members of the Glasgow Financial Alliance for Net Zero (GFANZ) have committed to align their portfolios with the pathway to the Paris Agreement targets using "gold standard" procedures and metrics, with balance sheets totalling over $130tn. This discrepancy, if publicly disclosed, would expose the fund manager to accusations of greenwashing. 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