{"id":59512,"date":"2022-10-19T18:15:03","date_gmt":"2022-10-19T16:15:03","guid":{"rendered":"https:\/\/staging.i4ce.org\/?p=59512"},"modified":"2022-10-25T15:06:14","modified_gmt":"2022-10-25T13:06:14","slug":"net-zero-commitments-prioritise-impact-climate","status":"publish","type":"post","link":"https:\/\/staging.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/","title":{"rendered":"Net zero commitments need to prioritise impact"},"content":{"rendered":"<p><strong><span class=\"TextRun SCXW58621040 BCX8\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW58621040 BCX8\">Over the past couple of years, t<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">he <\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">growing <\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">net zero commitments<\/span> <span class=\"NormalTextRun SCXW58621040 BCX8\">across financial institutions strengthened the<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\"> focus on<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\"> their portfolios\u2019<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\"> greenhouse gas emissions.<\/span> <span class=\"NormalTextRun SCXW58621040 BCX8\">Yet, t<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">his focus<\/span> <span class=\"NormalTextRun SCXW58621040 BCX8\">does not <\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">guarantee emissions are<\/span> <span class=\"NormalTextRun SCXW58621040 BCX8\">truly reduced in the real economy.<\/span> <span class=\"NormalTextRun SCXW58621040 BCX8\">For that to happen, t<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">here is a<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\"> pressing<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\"> need for <\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">decarbonisation <\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">approaches focused on impact generation<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">, <\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">with<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\"> the appropriate indicators. <\/span><\/span><span class=\"TrackChangeTextInsertion TrackedChange SCXW58621040 BCX8\"><span class=\"TextRun SCXW58621040 BCX8\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW58621040 BCX8\">According t<\/span><\/span><\/span><span class=\"TrackChangeTextInsertion TrackedChange SCXW58621040 BCX8\"><span class=\"TextRun SCXW58621040 BCX8\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW58621040 BCX8\">o <\/span><\/span><\/span><a href=\"https:\/\/staging.i4ce.org\/en\/team\/sarah-bendahou\/\" target=\"_blank\" rel=\"noopener\"><span class=\"TrackChangeTextInsertion TrackedChange SCXW58621040 BCX8\"><span class=\"TextRun SCXW58621040 BCX8\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW58621040 BCX8\">Sarah <\/span><\/span><\/span><\/a><span class=\"TrackChangeTextInsertion TrackedChange SCXW58621040 BCX8\"><span class=\"TextRun SCXW58621040 BCX8\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><a href=\"https:\/\/staging.i4ce.org\/en\/team\/sarah-bendahou\/\" target=\"_blank\" rel=\"noopener\"><span class=\"NormalTextRun SpellingErrorV2Themed SCXW58621040 BCX8\">Bendahou<\/span><\/a><span class=\"NormalTextRun SCXW58621040 BCX8\">, <\/span><\/span><\/span><span class=\"TextRun SCXW58621040 BCX8\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW58621040 BCX8\">p<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">ublic d<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">evelopment banks are in<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\"> a<\/span> <span class=\"NormalTextRun SCXW58621040 BCX8\">unique position to adopt such approaches<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\"> and indicators<\/span><span class=\"NormalTextRun SCXW58621040 BCX8\">, paving the way for private financial institutions.<\/span><\/span><\/strong><\/p>\n<p>&nbsp;<\/p>\n<h2>Net zero commitments overfocus on reducing financed emissions<\/h2>\n<p>The net zero concept was originally introduced in the Paris Agreement, representing \u201c<a href=\"https:\/\/staging.i4ce.org\/wp-content\/uploads\/I4CE%E2%80%A2Framework_Alignment_Financial_Paris_Agreement_52p.pdf#page=15\" target=\"_blank\" rel=\"noopener\">a shift in framing climate mitigation action away from prioritizing \u2018relative\u2019 changes in greenhouse gas emissions to focus on the rapid reduction of total or \u2018absolute\u2019 emission levels needed to achieve a \u2018net zero\u2019 balance<\/a>\u201d.\u00a0<\/p>\n<p>&nbsp;<\/p>\n<p>\nSince then, there has been an increasing number of net zero commitments in the past few years across the financial sector, within the private sector (e.g. the <a href=\"https:\/\/www.gfanzero.com\/\" target=\"_blank\" rel=\"noopener\">Glasgow Financial Alliance for Net Zero \u2013 GFANZ<\/a> in 2021) and within public development banks (e.g. at <a href=\"https:\/\/www.afd.fr\/en\/actualites\/joint-declaration-all-public-development-banks-world\" target=\"_blank\" rel=\"noopener\">the Finance in Common Summit in 2020<\/a>). The early priority of the financial sector was \u201cto decarbonise financial portfolios, in the hope that divestments will alter the cost of capital for greenhouse gas emitters and reduce real world emissions\u201d, but it\u2019s still not the case for the entire economy, as recently highlighted by <a href=\"https:\/\/www.finance-watch.org\/wp-content\/uploads\/2022\/06\/Report%E2%80%93Making-Finance-contribute-to-a-Net-Zero-Economy.pdf#page=5\" target=\"_blank\" rel=\"noopener\">Finance Watch<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>Key stakeholders in the net zero commitment space (e.g. <a href=\"https:\/\/sciencebasedtargets.org\/\" target=\"_blank\" rel=\"noopener\">the Science-based Targets Initiative \u2013 SBTi<\/a>, and the GFANZ among others) are now highlighting that the focus should be on contributing to real world emission reductions, i.e. financing emission reductions rather than simply reducing their financed emissions, a view shared by <strong>I<span style=\"color: #ff0000;\">4<\/span>CE<\/strong>. What does that mean in practice? For example, investors may divest from fossil fuel assets by selling them off, to reduce their portfolio emissions, without taking any further action to support these assets\u2019 transition towards net zero, and therefore without any assurance that their divestment will lead to greenhouse gas emission reductions. Another financial institution with less ambitious commitments then invests in these assets, which would continue to have the same level of emissions in the real economy, and this divestment, even if it significantly reduced portfolio emissions for the first financial institution, will have no positive impact at all on the economy\u2019s transition.<\/p>\n<p>&nbsp;<\/p>\n<p>\nAlso, emissive yet transition-enabling activities aligned with national and sectoral decarbonisation pathways in the longer term may be needed, particularly in a developing country context. They may allow other activities to make a significant contribution to climate change mitigation and to a country\u2019s development objectives. One example could be investments in Paris-aligned infrastructure development such as public transport infrastructure. And in this case, the related greenhouse gas footprinting will not reflect these investments\u2019 contribution to the transition.<\/p>\n<p>&nbsp;<\/p>\n<h2>\nImpact generation must be measured as well<\/h2>\n<p>While portfolio emission pathways are not necessarily relevant, moving away from emission-based indicators needs to come with safeguards to ensure that the quest for impact does not come at the expense of effective climate action. Specific indicators are needed to understand if the new impact approaches being adopted are sufficiently ambitious to achieve climate goals, and to ensure their robustness and credibility.<\/p>\n<p>&nbsp;<\/p>\n<p>\n<span class=\"TextRun SCXW261130136 BCX8\" lang=\"EN-GB\" xml:lang=\"EN-GB\" data-contrast=\"auto\"><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\" data-ccp-charstyle-defn=\"{&quot;ObjectId&quot;:&quot;f9b7b840-3385-49b2-9c42-3ba19d39fd9a|53&quot;,&quot;ClassId&quot;:1073872969,&quot;Properties&quot;:}\">Fossil fuel asset retirement is one example that may<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\"> help<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\"> generate that <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">credibility if<\/span> <span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">appropriate approaches are followed<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">. <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">Robust retirement <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">approaches are still lacking and require meaningful indicators to ensure compatibility with mitigation goals. <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">S<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">uch <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">i<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">ndicator<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">s <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">may <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">include capital committed toward managed phaseout schemes that accelerate the <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">r<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">etirement of high-emitting assets<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">,<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\"> as suggested by GFANZ<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">.<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\"> But <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">more <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">work<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\"> is<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\"> needed to ensure that such indicators are accompanied by others that allow checking on the right <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">level of <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">ambition as well as <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">overall consistency<\/span> <span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">of the followed approach within the portfolio<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">, thus<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\"> ensuring that positive efforts in one asset class are not <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">undermined through inconsistent action <\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">in other asset classes<\/span><span class=\"NormalTextRun SCXW261130136 BCX8\" data-ccp-charstyle=\"cf01\">.\u00a0<\/span><\/span><span class=\"EOP SCXW261130136 BCX8\" data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:160,&quot;335559740&quot;:259}\">\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<p>\nPublic development banks need to lead the way on these approaches, especially considering their mandate for development, and the required additionality of their intervention (i.e., only funding projects that are either too risky or not profitable enough to attract private finance). Although, like other financial institutions, public development banks may differ in their stakeholders, portfolio and client characteristics, and operating environments and geographic constraints, they share the same overarching goal of contributing to development and generating transformational impact, through financial and non-financial support. This means they should lead the way in their engagements to have impact on real economy. Their approaches can in fact be relevant for any other financial institution seeking to ensure its net zero commitments are ambitious enough and translate into tangible impact for economy transition.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Over the past couple of years, the growing net zero commitments across financial institutions strengthened the focus on their portfolios\u2019 greenhouse gas emissions. Yet, this focus does not guarantee emissions are truly reduced in the real economy. For that to happen, there is a pressing need for decarbonisation approaches focused on impact generation, with the appropriate indicators. According to Sarah Bendahou, Public development banks are in a unique position to adopt such approaches and indicators, paving the way for private financial institutions.<\/p>\n","protected":false},"author":9,"featured_media":59610,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[79],"tags":[],"class_list":["post-59512","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog-post"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Net zero commitments need to prioritise impact - I4CE<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Net zero commitments need to prioritise impact - I4CE\" \/>\n<meta property=\"og:description\" content=\"Over the past couple of years, the growing net zero commitments across financial institutions strengthened the focus on their portfolios\u2019 greenhouse gas emissions. Yet, this focus does not guarantee emissions are truly reduced in the real economy. For that to happen, there is a pressing need for decarbonisation approaches focused on impact generation, with the appropriate indicators. According to Sarah Bendahou, Public development banks are in a unique position to adopt such approaches and indicators, paving the way for private financial institutions.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/\" \/>\n<meta property=\"og:site_name\" content=\"I4CE\" \/>\n<meta property=\"article:published_time\" content=\"2022-10-19T16:15:03+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-10-25T13:06:14+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.i4ce.org\/wp-content\/uploads\/2022\/10\/Format-carre.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1856\" \/>\n\t<meta property=\"og:image:height\" content=\"1843\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Sacha Poree\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/staging.i4ce.org\/wp-content\/uploads\/2022\/10\/Sarah-Bendahou-twitter.png\" \/>\n<meta name=\"twitter:creator\" content=\"@I4CE_\" \/>\n<meta name=\"twitter:site\" content=\"@I4CE_\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Sacha Poree\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/\"},\"author\":{\"name\":\"Sacha Poree\",\"@id\":\"https:\/\/www.i4ce.org\/#\/schema\/person\/019647dfff6cbbde1a8f49ae7edf6346\"},\"headline\":\"Net zero commitments need to prioritise impact\",\"datePublished\":\"2022-10-19T16:15:03+00:00\",\"dateModified\":\"2022-10-25T13:06:14+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/\"},\"wordCount\":804,\"publisher\":{\"@id\":\"https:\/\/www.i4ce.org\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/staging.i4ce.org\/wp-content\/uploads\/2022\/10\/Format-carre.jpg\",\"articleSection\":[\"Blog post\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/\",\"url\":\"https:\/\/www.i4ce.org\/en\/net-zero-commitments-prioritise-impact-climate\/\",\"name\":\"Net zero commitments need to prioritise impact - 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Yet, this focus does not guarantee emissions are truly reduced in the real economy. For that to happen, there is a pressing need for decarbonisation approaches focused on impact generation, with the appropriate indicators. 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