Process for reviewing alignment with minimum criteria (target-setting and reporting)

In March 2022, the Alliance approved an updated set of commitment-related documents, which strengthen and clarify the requirements for members.

The Governance Document outlines the minimum criteria for membership and the process for the assessment of members’ compliance with respect to target-setting.

For the cases where financial institutions cannot meet the minimum requirements, the document describes the delisting process as a measure of last resort.

The following process has been unanimously adopted by the  Alliance’s Steering Group.

For reviewing the anonymised cases a Review Group will be established. This group consists of the MRV Reporting Working Group, MRV Co-Leads, and two Steering Group Representatives, who are assigned to the group on a voluntary basis.

After the review by the Review Group and following the member’s response – depending on the response –  the member’s compliance is either deemed sufficient or a traffic light system (red, orange, yellow) is applied. This means that the insufficient or non-compliant items will be categorised using the below:

Red light – clearly not in line with the Alliance’s minimum requirements, which will be progressively reinforced over time in line with the latest official version of the Alliance Target Setting Protocol:
  • less than 3 targets out of 4 (e.g. sub-portfolio and engagement targets only)
  • no engagement targets (mandatory requirement)
  • targets sent to the Alliance Secretariat without evidence of their public disclosure by the asset owner
  • targets with an ambition below the minimum range defined by the target-setting protocol (e.g. 10% financed emission reduction between 2020 and 2025)
  • targets with a time horizon over the maximum annual reporting to Alliance Secretariat (e.g. financed emission reduction between 2020 and 2040)
  • targets not sent before the official deadline
Orange light – Improvements require more work, under review for the next year reporting:
  • insufficient explanation despite the anonymised peer review described above
  • incomplete annual reporting to Alliance Secretariat on some mandatory issues (e.g. absolute financed emissions)
Yellow light – Improvements welcome, but no action taken:
  • the low coverage ratio of a specific target as a proportion of AUM of target v. that pledged (e.g. less than 50%)
  • incomplete annual reporting to Alliance Secretariat on some optional issues

Members will be informed by the Alliance Secretariat in writing about the process steps taken. After applying the traffic light system, depending on the category, the following process steps will be taken:

Additional clarification

To avoid any potential conflict of interest, an asset owner that participates in any of the following: the Reporting Peer Review Group (offering suggestions for improvements to targets); the Steering Group Representatives (giving feedback on future reporting requirements), or the Steering Group (deciding on the start of a potential delisting process) shall not take part in any decision concerning its own organisation.

This mechanism applies to members’ intermediate targets and will also be used as a model for assessment of compliance with Alliance’s positions.