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Next year will see a wave of decarbonisation pledges

Investors committed to the Glasgow Financial Alliance for Net Zero cannot 'wait until 2049 to get busy', says the keynote speaker at affiliate title Responsible Investor's USA-focused event.

The new year will bring a wave of decarbonisation pledges as asset owners and investors seek to uphold their commitments to the Glasgow Financial Alliance for Net Zero, according to Nili Gilbert, chair of an advisory panel for the new initiative.

“In terms of activity you can expect to see next year, you can start looking for more and more of those public targets to be published,” Gilbert said during a keynote interview for affiliate title Responsible Investor’s virtual RI USA 2021 event. “Every institution that has made a net-zero pledge within GFANZ must also now be held to those commitments.”

And the first step towards making good on those pledges is for investors to publish their emissions reductions targets, according to Gilbert, who also co-founded the Net Zero+ Investment Collaborative and oversees the investment committee for the David Rockefeller Fund.

GFANZ launched in April as an umbrella group for several net-zero initiatives in the global financial industry. As the COP26 climate conference in Scotland approached in November, the number of commitments grew and now represents more than $130 trillion in capital from 450 financial institutions.

While the headline numbers for GFANZ are impressive, the private markets industry is not well represented, as reported by Bloomberg in November.

After overall pledges are published, signatories are required to set five and 10-year interim targets, she explained, adding “we can’t wait until 2049 to get busy”.

Once investors set their targets, they must report annual data about their work meeting those targets. This gives the public an opportunity to “evaluate” an investor’s commitment while GFANZ will “continue our own processes for accountability”, Gilbert said.

“Sometimes you’ll see folks beating up on GFANZ members for the past. And what I think that we really need to do now is hold them accountable for the commitments that will need to be made going forward, because that’s where the hard work is and the important work really,” she said.

GFANZ is placing an initial focus on “hard to abate sectors” including fossil fuels, airlines and the steel industry, Gilbert continued. “The hard work we have to do is forward-looking… our belief is that focusing on deep decarbonisation is the most important work we have to do.

“At the end of the day, GFANZ places its emphasis on using finance as a lever to achieve decarbonisation across the real economy, not just portfolio level accounting.”

Addressing climate change through decarbonisation is among the most important areas of fiduciary duty investors today face, Gilbert explained. In the US, she highlighted a policy shift towards incentives-based measures to encourage emissions reductions.

“I think that the US flavour of leading with incentives, essentially more carrots than sticks, will cause the US ultimately to become a leader in investing in much-needed innovation,” she said. “One thing that we really need to hope for is breakthroughs in terms of technologies and solutions to this climate problem.”

RI USA 2021 continues today and is free to air.