The four key financing strategies of GFANZ Net-Zero Transition
Highlights:
- Role of transition finance
- Strategies in GFANZ framework
- Emphasis varies by component
- Overarching accountability structures
- Managed phaseout vital
1. What is the role of transition finance and the four key financing strategies?
- Transition finance is investment, financing, insurance, and related products and services that are necessary to support an orderly, real-economy transition to net zero as described by the four key financing strategies.
- The four key financing strategies provide a lens through which every financing opportunity can be viewed rather than a prescriptive taxonomy. These strategies aim to make clear that transition finance is about driving decarbonization in the real economy.
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2. How are the strategies embedded within the GFANZ NZTP framework?
- The four financing strategies are at the heart of transition planning and should inform considerations across the entire development process.
- Financial institutions are encouraged to apply all strategies to their organization, but emphasis on specific components may be more helpful when considering particular key financing strategies.
- Foundations, Metrics and Targets, and Governance are equally relevant for all financing strategies, as they are overarching accountability structures.
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3. Why is the managed phaseout of high-emitting assets of particular importance to the global transition to net zero?
- Many financial institutions have chosen to divest from high-emitting assets to reduce portfolio emissions, but divestment does not directly reduce real-world GHG emissions.
- A managed phaseout approach allows the stewardship of emissions out of the economy, instead of simply passing them to someone else.
- The approach also accounts for the fact that some high-emitting assets are often still needed in the near term, but they need to be retired within their normal design life to stay within the carbon budget.
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More details in the workshop: The four key financing strategies
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