GFANZ requires ‘careful repositioning’ to work, says PRI’s Fabian

GFANZ “clearly” requires “careful repositioning and clarification” if it is going to work, according to Nathan Fabian, chief sustainable systems officer at the Principles for Responsible Investment (PRI).

Speaking on a panel at the Oxford Sustainable Finance Summit today, he said: “The idea that an [asset] manager… who serves millions of different individual clients can set its own 2050 target and faithfully implement that supposedly on someone else’s behalf was frankly never going to work.”

Responding to a question about collaborative engagement and the importance of GFANZ, Fabian told attendees that the problem was that that the initiative was not clear enough about what it intended when it launched. 

GFANZ – Glasgow Financial Alliance for Net Zero – was launched in 2021 at the COP26 climate conference in Glasgow. 

The initiative, which has several sub-alliances covering insurance, banking and asset management, brings together more than 450 finance firms managing some $130 trillion in assets.   

But since its launch there have been some high-profile exits, including US investment giant Vanguard last year. 

The alliance with the greatest number of exits is the Net Zero Insurance Alliance, which has seen more than half of its members leave in recent months, including insurance giants AXA and Allianz. 

Fabian told delegates that the solution was not to “throw away GFANZ” but added that the initiative “is clearly going to have to have a careful repositioning and clarification of what members are meant to do”. 

Stressing the importance of asset managers to the transition, he suggested that GFANZ members could focus more on transparency and disclosure.  

“So why doesn’t a GFANZ manager have a job of assessing and transparently disclosing all investments aligned with the [net-zero] goal, all the investments holding back the goals, and engage their signatory base and make sure that they are transparently disclosing net contribution and net harm? Why not have that kind of approach from a manager in GFANZ?” he said.

On divestment, Fabian also called on investors not to “blindly divest” to achieve net-zero goals. “We have to use targets to guide our investment strategy but not blindly divest from sectors through volatile economic change, which we have and we’re going to continue to have, so blindly following targets does not help us sufficiently.”

“They’re signals,” he added, which can be used to “help inform how we engage and who we speak to, what we ask for. But we need some wiggle room”.

Richard Barker, an academic and board member of the International Sustainability Standards Board (ISSB), also expressed concerns about private sector net-zero claims. 

“One is the presumption that the private sector… can somehow fix it, which we can’t, and hand in hand with that [are] delusional claims from within the private sector, including financial institutions.” 

He called for more realism when it came to understanding “what you can do and can’t do, what you can do yourself and in collaboration, and what you have no power to achieve”.