As Net Zero financial institutions raise their ambitions, they shouldn’t lose the forest for the trees

  • Net Zero has quickly captured the attention of financial institutions and investors, but as the number of Net Zero pledges rises, expectations are rising that they should show a real economy impact.
  • The lack of comprehensive data on emissions draws many financial institutions into focusing only on high-emitting sectors and trying to improve data & analytics for those sectors
  • Although there’s an understandable desire to improve data quality and accessibility around customer emissions, a lot can still be achieved with just ‘order of magnitude’ estimates, and too narrow a focus on high-emitting sectors can overlook quick wins that benefit from financial institutions’ broad footprints
  • “Impact-aligned” in the context of Net Zero finance refers to those “seeking to increase portfolio exposures to companies and assets that create or are on a pathway to creating the impact a financial institution is seeking to have on the real world”.
  • “Impact-generation” are those “seeking to drive real-world climate outcomes not just by investing in companies that are aligned but actively contributing to overall decarbonization objectives [among companies that are not currently aligned].”

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Blake Goud

Blake Goud

Promoting adoption of responsible finance in Islamic markets & Islamic finance. CEO @RFIFoundation.