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 Glasgow Financial Alliance for Net Zero (GFANZ), the world’s 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.

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.

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’s 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.

Alongside the development and implementation of their own net-zero transition plans, financial institutions require resources to measure their portfolio companies net-zero progress

. Clear guidance can help to advance best practices on portfolio alignment methods and the range of portfolio alignment metrics used. As a result, this guidance enables financial institutions to better measure how aligned a portfolio or lending book is with net-zero objectives.

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 practitioner-led guidance has been developed based on input from net-zero stakeholders, including financial institutions, financial data providers, and civil society.

Read the full article here.