July 4, 2022

Resource Spotlight: GFANZ Transition Plan Framework

Resource Spotlight
GFANZ Transition Plan Guidance

The Glasgow Financial Alliance for Net Zero (GFANZ) is a global coalition of investors working towards the shared global goal of net-zero emissions by 2050. Net-zero is achieved when human-caused greenhouse gas emissions are reduced as much as possible, then balancing any remaining emissions with carbon dioxide removals from the atmosphere. GFANZ is an umbrella coalition that amalgamates net-zero initiatives across the financial system, including the Paris Aligned Investment Initiative (PAII), the Net-Zero Asset Owners Alliance (NZAOA) and the Net Zero Asset Managers (NZAM) initiative.

In June 2022, GFANZ released a draft Net-zero Transition Plan (NZTP) framework for the financial sector for public comment by July 27, 2022. Transition plans outline how financial institutions will achieve their net-zero targets and measure progress over time. They are intended to contain goals, actions and accountability mechanisms for financial institutions to align business activities with net-zero, delivering real-economy emission reductions. Transition plans are increasingly seen as a crucial accompaniment to a net-zero target, helping build credibility and trust.

This draft framework has broadly applicable recommendations and guidance to help financial institutions develop comprehensive and credible transition plans. The recommendations have ten core components organized under five themes:

  1. Foundations – define objectives with measurable targets, milestones, timelines and priorities
  2. Implementation strategy – align business activities, products, services and policies with net-zero objectives and priorities
  3. Engagement strategy – communicate and collaborate with clients, portfolio companies, industry peers and the public sector in support of net-zero
  4. Metrics + targets – decide on metrics and targets to assess and monitor progress towards net-zero
  5. Governance – develop structures for oversight and incentivization to supporting implementation of the net-zero transition plan

This draft guidance affirms a growing sentiment in the finance community: setting targets isn’t enough. Financial institutions must publish credible and comprehensive transition plans to demonstrate how the actions they intend to take will ensure they achieve them successfully.

For more info about transition planning from GFANZ, visit: https://www.gfanzero.com/publications/.