Broadening our net zero solutions for investors to accelerate clean energy investments across emerging markets
Meeting net zero goals requires more than simply divesting from high-emitting companies. In the past year, Anthesis has deepened our experience, technical expertise, and partnerships with civil society organizations to enable our firm to provide cutting-edge and robust support to financial institutions seeking to understand and implement ambitious net zero strategies.
Anthesis’ unique approach is tailored for investors at any stage of their decarbonization journeys and covers all emerging best practice target-setting frameworks, portfolio alignment metrics, and scienced-based sectoral pathways that financial institutions should adopt as they develop credible net zero transition plans. While Anthesis recognizes that there are a myriad of approaches that financial institutions can take to achieve net zero, the world can no longer wait for imperfect emissions data to materialize or stalled public policy to start driving change.
In the past year, we have encouraged investors to set targets that commit capital toward the $1 trillion of annual investment in clean energy (or “transition finance”) needed across emerging markets by 2030 to conform with the Paris Agreement according to a report released yesterday by the Independent High-Level Expert Group on Climate Finance at COP27. Transition finance in 2021 amounted to just $210 billion – a colossal shortcoming on the part of the world’s richest countries.
Addressing world leaders at the opening of COP27 earlier this week, UN Secretary General António Guterres framed wealthy nation’s inaction as “a fundamental question of international solidarity – and climate justice. Those who contributed least to the climate crisis are reaping the whirlwind sown by others.”
Having recently become an associate member of the Institutional Investor Group on Climate Change (IIGCC), Anthesis will be directly working to help define frameworks and strategies that will further enable institutional investors to achieve their net zero goals, while also mobilizing capital to facilitate climate solutions for emerging markets.
Embracing energy transition by investing in climate solutions: IIGCC’s flexible target-setting approach for investors
Anthesis recognizes that it will not be productive to adopt a single, inflexible formula for addressing the needs of hundreds of independent actors. Anthesis has instead long recognized that what’s required are individualized strategies tailored to clients’ unique situations.
IIGCC’s Net-Zero Investment Framework (NZIF), which allows investors to set flexible targets to scale up funding for climate solutions in addition to other portfolio-wide net zero alignment and decarbonization targets, represents a way forward that Anthesis will be helping to advance. Meaningful agreement on reducing greenhouse gas emissions will likely be especially difficult to achieve at this COP27 summit due to the multi-pronged impact of the war in Ukraine and the global surge in inflation.
Financial sector commitments to addressing climate change already appear dubious
The starting point for this week’s global event in Egypt is the outcome of COP26, last year’s United Nations-convened climate summit in Glasgow. Governments, multinational corporations, and leading financial institutions pledged to take additional action to reduce emissions to prevent a dangerous rise in global temperatures. But meaningful action has tended to lag behind these lofty commitments.
Non-state actors – most notably, corporations and financial institutions – will have their own efforts scrutinized at this year’s Africa COP. They have set a goal that will not easily be reached. In Glasgow last year, a coalition of investors with assets now totaling $150 trillion announced their ambition of ensuring their portfolios will be fully aligned with net zero GHG emissions by 2050 in keeping with goals of the Paris Agreement. This Glasgow Financial Alliance for Net Zero (GFANZ) – made up of high-profile banks, insurers, pension funds, assets managers, and an increasing number of private equity firms – also made a commitment to tailor their investments to confirm with the UN-set target of a 50 percent reduction in global emissions by 2030.
GFANZ further pledged to deliver as much as $100 trillion in financing to help emerging economies transition to net zero over the next three decades. National leaders in Africa and other parts of the developing world are sure to press GFANZ in Sharm El Sheikh to support specific climate-protection projects in their respective countries.
Clearly anticipating such challenges, GFANZ published its second progress report in the run-up to COP27 in late October in which the alliance claims it has worked to “develop and support both top-down and bottom-up initiatives to scale financing” in emerging markets. Yet these commitments have not yet been met with real world flows of capital. Anthesis supports the efforts of GFANZ to coalesce and support its investor members to act on their commitments. But the recent decision by GFANZ to drop its partnership with the UN-backed Race To Zero Campaign over its requirements that banks stop financing new fossil fuel projects demonstrates that there is still a lot of work to be done to develop accountability mechanisms for the voluntary initiative.
However, there are reasons to be optimistic that this much-needed accountability is still achievable for GFANZ. Earlier today, Mark Carney – the former Bank of England Governor and current Co-Chair of GFANZ – welcomed a groundbreaking report released today by the UN High Level Expert Group on Non-State Entity Net Zero Commitments. The Expert Group seeks to alleviate concerns about greenwashing by publishing a series of requirements to ensure that net zero claims by corporates and financial institutions are credible. In his remarks on the UN report, Carney reportedly said that GFANZ members had been “working at pace” to set emissions-reduction targets that would allow those investors to meet the criteria presented in the UN report.
Partnerships between private sector and civil society are critical to accelerate and scale clean energy investments across emerging markets
Anthesis is proud to be working with some of the most ambitious and impactful financial firms to develop net zero targets that are both measurable and directly tied to funding climate solutions for the world’s most vulnerable.
Anthesis’ involvement with IIGCC to support investors’ implementation of NZIF complements our long collaboration with the Science-Based Targets initiative (SBTi). In November 2021, Anthesis authored SBTi’s guidance for the private equity industry. Anthesis aims to further such collective work with IIGCC by showcasing investor best practices to create robust, accountable, and actionable net zero strategies.
