Four Key Financing Strategies Of GFANZ Net-Zero Transition
Highlights:
The role of transition finance
Strategies in GFANZ framework
Emphasis varies by component
Overarching accountability structures
Managed phaseout is vital
Table of Contents
The Role Of Transition Finance And 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, which are: Climate Solutions, Aligned, Aligning, Managed Phaseout.
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.
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.
Why Is The Managed Phaseout Of High-Emitting Assets Crucial 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.
