Former Bank of England governor Mark Carney’s coalition of more than 500 financial institutions that have signed up to net zero is named as among the private sector climate initiatives that must maintain tighter standards, in a UN report with guidelines to stop corporate greenwashing.
Companies could not “claim to be net zero” while continuing to build or invest in new fossil fuel assets and decarbonization plans must “not support” new coal, oil and gas supplies, the UN-appointed High-Level Expert Group said. “Net zero is entirely incompatible with continued investment in fossil fuels.”
Net zero is entirely incompatible with continued investment in fossil fuels
The report published at the COP27 climate summit in Egypt on Tuesday sought to address greenwashing concerns by laying out a series of requirements to ensure the credibility of corporate net zero emissions claims.
“Leadership campaigns like Race to Zero and sector alliances like the Glasgow Financial Alliance for Net Zero (Gfanz) must reinforce high-quality voluntary efforts and consolidate best practices into general norms,” the report said.
UN secretary-general António Guterres said “the message is clear to all those managing existing voluntary initiatives”, as he launched the report.
“Abide by this standard and update your guidelines right away — and certainly no later than COP28,” he added.
Voluntary corporate sector climate initiatives such as Gfanz, which Carney chairs, have come under criticism from a variety of climate change pressure groups, who have said their rules were too lax. Gfanz recently weakened a requirement relating to fossil fuel investments, citing antitrust issues.
BlackRock and Vanguard, the world’s two biggest asset managers and Gfanz members, said recently they would continue to invest in fossil fuels and did not believe it was necessary to end new coal, oil and gas investment.
But the UN report said that to be credible, net zero targets must cover all a company’s emissions across business and supply chains.
The expert group behind the report was led by Catherine McKenna, a former climate and environment minister of Canada. Carney was also previously governor of the Bank of Canada.
Companies must “meet the price of admission” to voluntary initiatives and a failure to meet the standards should result in “consequences”, which could mean “someone’s got to leave [the initiative],” McKenna told the Financial Times.
“There are some companies, in particular financial institutions, that don’t understand that when you make a net zero commitment it means something,” she added.
McKenna’s report stressed the need to prioritize rapid emissions cuts and warned of the “potential unrealistic dependence on [emissions] removals.”
On Tuesday, ShareAction, a charity group that promotes responsible investment, said many banks that were Gfanz members had left heavy-emitting sectors, such as agriculture, out of their climate targets.
The majority had set emissions-intensity targets — a measurement based on pollution relative to economic output, which McKenna’s report said was not appropriate — and many had not included underwriting activities in their goals, ShareAction said.
The UN expert group was lukewarm on carbon credits — units companies buy to compensate for their pollution — as they could lack “integrity”, it said. Companies must also not buy cheap carbon credits in place of reducing their emissions, it added.
However, interest in carbon credits as a way of raising money in return for carbon savings is building at COP27 among some parties.
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The Africa Carbon Markets Initiative launched its venture on Tuesday, which aims to scale up the production of carbon credits in the region to 300 million annually by 2030.
U.S. climate envoy John Kerry is also working on a proposal for a new power-sector credits system that is expected to be announced on Wednesday.
Germany’s special climate envoy Jennifer Morgan said on Tuesday that her team was “familiar with” the U.S. proposal but was “concentrating our efforts … on absolute emissions reductions, because we think that that is the bulk of where our efforts should go.”
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