GFANZ is expected to announce plans to start work on how nature can be incorporated into financial institutions’ transition to net zero in the coming month, Responsible Investor can reveal.
In its net-zero transition plan framework for financial institutions, published in November 2022, GFANZ said the energy transition “should strengthen nature and biodiversity”. It added that work was required to develop pan-sector guidance on how financial institutions can integrate it into transition plans.
Then at COP15 in Montreal, GFANZ co-chair Mark Carney urged private finance to ensure net-zero transition plans include clear priorities on deforestation, protecting nature and restoring biodiversity.
In February, GFANZ began a scoping exercise into how nature can fit into net-zero transition plans, and whether the alliance could be additive to work in the space. This involved engagement with NGOs, governments, businesses and financial institutions, as well as with the UK’s Transition Plan Taskforce (TPT), WWF, ISSB, TCFD and TNFD.
Interest in nature’s place in transition plans has been growing over the past year, with the TPT emerging as a leader in the field. The taskforce’s final disclosure framework for climate transition plans, published in November, included advice on incorporating nature.
Speaking to RI, Joy Williams, head of financial institution transition planning at GFANZ, said: “There is a lot of momentum in this space, and we wanted to make sure that we would be adding value and not duplicating what others are doing.”
She noted that a key finding of the scoping work was that stakeholders “responded well to thinking about nature as a climate mitigator, adaptation support, and then provider of ecosystem services”.
“GFANZ is naturally more focused on the mitigation space, and there is a demand to avoid any unnecessary fragmentation,” she added.
Stakeholders felt there was value in GFANZ working on nature within its net-zero transition plan framework, Williams added.
GFANZ hinted at the work it will undertake in its response to the ISSB’s request for feedback on its next priority topic. The alliance said it is “in the process of forming a group of members to support harmonisation across leading initiatives in the market and establish ambition around nature for 2024”.
Pieces of a puzzle
Williams was unable to provide details of the planned work on nature as it has not been approved by GFANZ’s principals group.
However, she said: “Hopefully from next year we will be kicking off work exploring more deeply how nature can be incorporated into a financial institution’s transition to net zero to support climate mitigation on a strategic level.”
GFANZ’s principals group sets its strategic direction and priorities, as well as monitoring progress. Members include Aviva chief executive Amanda Blanc, BlackRock’s Larry Fink and Michelle Scrimgeour, chief executive of Legal & General Investment Management.
Williams said GFANZ will work with members on nature, adding that some financial institutions have already flagged it would be an exciting opportunity to get involved in. The alliance also plans to engage external stakeholders such as the TNFD and the Science Based Targets Network (SBTN) to discuss how their work could be incorporated by GFANZ.
“We have so many organisations leading different parts of the nature work. TNFD is putting down the risk, impact and dependency reporting, while Finance for Biodiversity is starting on land use targets and drivers,” Williams said.
“And SBTN has – and is working on – targets for the real economy, and is expected to eventually expand to financial institutions.
“If you think of all these things as pieces of a puzzle, then the net-zero transition plan framework could provide a home you can point to and potentially incorporate these in some way.”
GFANZ’s agenda and work plan for 2024 is being developed and approved by the principals group, which is expected to meet at COP28. Once the process has been completed, GFANZ will make an announcement about how its nature work will get taken forward.
RI understands further details on the work plan are expected in the coming month.