COP27 round-up: GFANZ members still funding firms linked to deforestation

Financial news from Sharm El-Sheikh: IOSCO consults on carbon markets compliance, The White House publishes nature-solutions roadmap.

Glasgow Financial Alliance for Net Zero (GFANZ) members are investing $8.5 billion in companies at risk of causing deforestation, according to a report launched at COP27 by Global Witness. Research by the NGO found that GFANZ members have continued investing in agricultural businesses accused of mass-scale deforestation, such as Brazilian firm JBS, since joining the alliance. An additional 10 million shares in JBS have been acquired by members of the group since COP26. Investments in other controversial agribusinesses linked to deforestation – including Astra Argo Lestari, SLC Agricola and Wilmar International – have also gone up since last year.

Staying with GFANZ, the private finance working group for Egypt’s Nexus for Water, Food and Energy (NWFE) has voiced its support for the Egyptian government’s plans for the energy transition via the NWFE. The GFANZ-convened group is comprised of six founding members including the Bank of America, Citigroup, Deutsche Bank, HSBC, Standard Chartered and Commercial International Bank Egypt. The plan, initiated under the umbrella of the 2050 National Climate Change Strategy and Nationally Determined Contribution, aims to achieve sustainable growth, low-carbon development, and resilience and adaptability to climate change.

Global regulatory forum IOSCO has published two sets of recommendations for jurisdictions seeking to establish mandatory carbon compliance markets to meet their obligations under the Paris agreement, and on regulatory oversight of voluntary carbon markets. IOSCO chairman Jean-Paul Servais said that the body had developed the frameworks to promote integrity and liquidity in carbon markets, which “have so far fallen short of their objectives”. Market participants have 90 days to respond to the proposals. While IOSCO does not itself have any regulatory power, its recommendations are influential – a flagship report on ESG data issued last year by the body has informed developments in the area across the EU, Japan and other jurisdictions.

The White House has announced a nature-based solutions roadmap in response to the climate crisis at COP27. The report outlines recommendations for the US to implement nature-based solutions by addressing the climate crisis, nature loss and inequity. It builds on the executive order released on Earth Day by president Biden, focusing on five areas of action including updating policies, unlocking funding, leading with federal facilities and assets, training the nature-based solutions workface and prioritising research. In addition to the roadmap, the White House released a resource guide with examples of nature-based solutions the Biden administration has already implemented.

The Taskforce on Nature-related Financial Disclosures (TNFD) has added seven members to the taskforce, bringing the total number to 40. The new members, which were all chosen from the TNFD forum, are from Spanish renewable energy company Acciona, German chemicals firm Bayer, US chemicals company Dow, consumer goods firms LVMH and Reckitt, Japan’s Norinchukin Bank and Chinese real estate company Swire Properties. In addition, the TNFD has added a funding partner, The Macdoch Foundation, which will also join the group’s Stewardship Council. Nature Finance and the Centre for Global Commons at the University of Tokyo will join as knowledge partners, adding to the existing network of 16 partners. Three new TNFD consultation groups have also been established in Brazil, Colombia and France.

The Future of Sustainable Data Alliance (FoSDA) has published a major review of critical sustainability data gaps for policymakers and financial institutions. This is the second annual review carried out by the UN-backed service provider body, after it published a best practice framework for ESG data at COP26 last year. FoSDA identified a total of 25 critical gaps for sovereign issuers including GHG emissions, income inequality, corruption and rule of law, as well as 17 for corporates such as temperature alignment, fossil fuel reserves, employee safety and health and penalties.

An additional 86 asset managers have disclosed net-zero 2050 targets, bringing the total assets in the Net Zero Asset Managers Initiative to more than $66 trillion. The new signatories, including Northern Trust AM and AllianceBernstein, bring the total number of asset managers to 291. Around $21.8 trillion collectively is now committed to be managed in line with achieving net zero by 2050.

The Paris Aligned Asset Owners Initiative has published its inaugural progress report and initial target disclosures on best practice for actioning net-zero commitments. The report found that 98 percent of PAOO signatories that have disclosed targets have established a goal – either qualitative or quantitative – for increasing investments in climate solutions. Initial target disclosures have been published for an additional 13 asset owners, including AP7, Lloyds Banking Group Pensions Trustees Limited and Ilmarinen, taking the total to 40. The signatories will draw on the Net Zero Investment Framework to set targets and net-zero plans.