The credibility of a net-zero commitment relies upon the transparent disclosure of science based 1.5° scenarios and respective metrics and targets. Stakeholders must be able to comprehend the transition plan and track progress towards net-zero emissions.
This article presents UNEP FI’s eleventh recommendation on credible net-zero commitments as outlined in a UNEP FI input paper to the G20. The eleven recommendations, alongside this series of articles, aim to support policymakers in understanding the progress in net-zero finance to date and how to scale up the global transition to a net-zero economy.
Publicly tracking progress on net-zero commitments serves to build trust, allows to highlight successful transition strategies and may encourage others to set ambitious targets.
Disclosure requirements for corporates, including financial institutions, are becoming more prevalent. The International Sustainability Standards Board’s (ISSB) recently issued two standards on general sustainability-related financial disclosures and climate-related disclosures which is a first step towards a global baseline for sustainability reporting. Presently it is rare for a financial institution or a corporate entity to disclosure which scenario or set of scenarios guide their planning, this is an essential component of having a credible approach as described in article on Recommendation II of this series. Policymakers should look to increase transparency around the underlying scientific alignment of private sector actors by increasing the disclosure of scenarios selected by such entities.
Standardisation of sustainability disclosures is needed to ensure comprehensiveness and comparability of the data that is reported to the public. Building upon voluntary sustainability disclosure initiatives, a broad range of real-economy actors will soon be required to annually disclose their emissions data, net-zero targets and progress.
Due to their unique role in the economy, financial institutions are both preparers and users of such sustainability disclosures. By adopting global standards and enhancing transparency, net-zero leaders can credibly showcase their progress towards achieving net-zero emission. Simultaneously, this increased transparency equips financial institutions with information to effectively allocate transition financing.
Alongside disclosure, the importance of assurance standards to strengthen the quality and reliability of reported data is gaining more attention. Conducting an independent valuation of annual reporting will not only boost confidence in the sustainability disclosures themselves but also the overall credibility of the efforts towards achieving net-zero by 2050.
In conclusion, a globally coordinated approach to promote corporate sustainability disclosure represents a critical move towards tracking progress on net-zero targets and streamlining the exchange of information between financial market participants in the transition. Yet, it is imperative that regulators and standard setters continue the work so that the data disclosed holistically reflects impacts on the environment and society at large.