Over 100 years ago, policymakers started to acknowledge the dramatic influence pollution would have on our planet. Over 50 years ago, scientists and academics started to design mathematical models demonstrating the numerous interlinkages in our economic and environmental systems, and the influence this would have on warming the climate. 30 years ago, the Kyoto Protocol confirmed government commitments to reduce greenhouse gas (GHG) emissions, based on the scientific consensus that global warming is occurring and that CO₂ emissions deriving from human activity are driving it.

Yet, emissions have continued to rise at an unprecedented rate. And governments, corporates and financial actors are caught in a quagmire, not wanting to risk economic stability nor take action unilaterally. This must no longer be the case.

This article is the first in a series of eleven designed to help policymakers understand the progress to date and how to scale up the global transition to a net-zero economy. The series is based on a UNEP FI input paper to the G20 that sets out recommendations for credible net-zero commitments made by financial institutions, and the UN Secretary General’s High Level Expert Group’s Integrity Matters report which advances net-zero commitment for the economy at large.

Reality check

The Intergovernmental Panel on Climate Change (IPCC) sixth assessment report demonstrated that:

  • More than 100 countries have either adopted, announced or are discussing net-zero commitments, covering more than two-thirds of global GHG emissions.
  • Mitigation actions, supported by policies, have contributed to a decrease in global energy and carbon intensity, with a growing number of countries achieving absolute GHG emission reductions for more than a decade.
  • The magnitude of global climate finance flows increased by up to 60% between 2014 and 2020, and financing channels broadened.

Yet, the same report also acknowledges that:

  • Without immediate and deep emissions reductions across all sectors, 1.5°C is beyond reach.
  • To limit global warming to around 1.5°C, global greenhouse gas emissions need to peak before 2025 at the latest and be reduced by 43% by 2030.
  • If climate goals are to be achieved, both adaptation and mitigation financing would need to increase manyfold.
Drive transformation with science

Today, numerous financial institutions are showing ambitious leadership by publicly committing to align their lending and investment portfolios with the global climate objectives, i.e., achieving net-zero CO₂ emissions by 2050. This objective is derived from the point in time at which anthropogenic carbon emissions globally reach zero for the planet’s climate system to stabilise at no more than 1.5°C above pre-industrial levels by 2100 (50 years after achieving net zero).

UNEP FI has worked with practitioners across the financial industry to co-design credible approaches to achieve net zero. These industry-level collaborations have demonstrated that it is possible for financial institutions to align with science. However, a net-zero policy framework should, amongst others, require sectors to align with science-based transition pathways to allow for this transition to happen.

The science-based approach to achieve net-zero CO₂ emissions by 2050 means that all accumulated emissions remain within the 1.5°C IPCC carbon budget required by 2050. There is scientific consensus that the relationship between all accumulated CO₂ emissions and the increase in global temperature is quasi linear. This implies that any delay in reducing emissions today would only diminish our chances of achieving the necessary reductions in the future.

In other words, limiting global warming to 1.5°C can only be achieved through prompt action. High overshoot scenarios, i.e., scenarios that aim for limiting global warming to 1.5°C after a temporary high temperature overshoot, only delay action and rely on large-scale deployment of carbon dioxide removal which, according to the IPCC, is unproven and thus poses a significant risk of not achieving the goal of limiting global warming to 1.5°C. Misalignment between science-based and industry pathways may erode confidence and undermine leadership for a credible transition.

Accelerate action with policy

A global level playing field is imperative to scale up net-zero alignment. According to the IPCC, regulatory instruments can support deep emissions reductions and climate resilience if scaled up and applied widely.

Regulatory initiatives such as sustainable finance taxonomies, corporate sustainability disclosure requirements and sustainable corporate governance rules emerge across jurisdictions. Such initiatives can mitigate the risk of greenwashing and carbon leakage, i.e., the situation whereby the efforts in reducing emissions by net-zero leaders are offset by steady or occasionally increasing emissions by laggards.

While a strengthened enabling environment is a prerequisite for a successful transition, a clear signal from the international community and governments can enable intensified climate alignment. In order to do so, governments need to support those who have committed to science-based net-zero pathways and address laggards through robust policy.

In conclusion, the decisions we make today and our actions in the next few years are crucial. We can still meet the Paris Agreement objective of net-zero emissions by 2050, but we are at the tipping point. In advance of the upcoming COP28 and in the interests of ensuring that sustainable finance remains firmly on the regulatory agenda, UNEP FI calls on policymakers to take action for credible net-zero commitments.

Aligning net-zero commitments with science-based 1.5°C no/low overshoot pathway objectives is one of the key recommendations for immediate and effective emission reductions. Aligning as swiftly as possible with these pathways, their objectives and assumptions, may still not be sufficient at this point in time to avoid overshoot, but every fraction of a degree of warming that can be avoided, will help avoid ruinous and irreversible damages.

Download UNEP FI’s G20 input paper to access the full set of recommendations for credible net-zero commitments from financial institutions.

Download the UN Secretary General’s High Level Expert Group Integrity Matters Report to access the full set of recommendations for all economic actors.