UN high-level expert group targets financial sector net-zero greenwashing

Financial institutions should not be able to claim to be net zero while continuing to invest in new fossil fuel supply, according to the UN’s high-level expert group (HLEG) on net-zero targets.  

In its first report on the integrity of net-zero commitments, the 17-member group – which is chaired by former Canadian environment minister Catherine McKenna and includes NZAOA chair Günther Thallinger and Helena Viñes Fiestas, rapporteur of the EU platform on sustainable finance – set out 10 recommendations to ensure clear standards and criteria for net-zero targets.

The list, which covers topics ranging from carbon offsets to the Just Transition, contains a series of industry-specific recommendations for financial institutions.

According to the HLEG, net-zero targets for the sector should include an immediate end to financing or investment for any firm involved in expanding coal infrastructure, as well as a clear phase-out path. Oil and gas phase-out policies must include a commitment to end financing and investment in support of new oil and gas.  

Targets should cover short-, medium- and long-term emissions reductions, and include facilitated emissions as well as scope 1, 2 and 3, while transition plans should include engagement and voting strategies. 

The report also says that a credible net-zero target should involve public disclosure of trade associations and positive lobbying for climate action.

On nature, financial institutions with a net-zero target should eliminate agricultural commodity-driven deforestation from investment and credit portfolios by 2025, and should begin to factor in nature risks and dependency to all aspects of their net-zero transition plans in anticipation of the final TNFD guidance.  

Finally, the report calls for government regulation of net-zero targets, starting with large corporate emitters and requiring annual reporting of progress. 

The launch of the HLEG report comes as Moody’s released research showing that just 14 percent of companies with very highly negative credit exposure to transition risk have disclosed detailed targets, while none have emissions reduction plans aligned with less than 2C.  

Of 2,000 rated companies examined across the risk exposure spectrum, close to 60 percent of those most at risk from the transition have not set a target, with insufficient data on a further 30 percent. Targets at the vast majority of highly exposed firms which have set one are aligned with 2.7C and above. The only segment where a majority of companies have below 2C-aligned targets is firms with a positive credit exposure to transition risk.