Net-zero can only be achieved through systemic change. It is time to move beyond the voluntary pledges made by net-zero leaders and to deliver ambitious climate policy. Over the past recent years, private sector leaders have demonstrated willingness and accepted the proof of concept in aligning with net-zero action, yet the economy will not turn based on the actions of a small number of credible leaders. Policymakers must drive change forward by implementing an optimal regulatory landscape that safeguards the credibility and accountability of climate action for all actors in the economy.

In recent years, scientists and world leaders have stressed the need to limit global warming to 1.5°C from pre-industrial levels by the end of this century. Failure will push the earth over its tipping point, drastically increasing the risk of adverse and irreversible impacts on people and ecosystems.

In 2021, the G20 Sustainable Finance Working Group published a UNEP FI input paper that sets out recommendations for credible net-zero commitments made by financial institutions. In 2022, the UN Secretary General’s High Level Expert Group released the Integrity Matters report which advances net-zero commitment for the economy at large.

Based on this work, we are publishing this 11-part article series to explore whether the financial system has reached the tipping point on net-zero action. At this critical time, the series will look at how policymakers can embed requirements for credible net-zero ambition across the financial system.

From leadership to global action

Encouragingly, policymakers recognise the need to establish sustainable finance regulation levelling up the substantial global voluntary climate commitments and are taking action in this regard. Nonetheless, action must urgently be intensified. Without immediate and deep emission reductions across all sectors, limiting global warming to 1.5°C is beyond reach. That is the alarming verdict of the latest Intergovernmental Panel on Climate Change (IPCC) findings.

In other words, the international community is falling short of the global climate objectives without a credible pathway in place. The net-zero leaders cannot achieve this goal unless the entire financial system, indeed the entire global economy, moves forward.

Embrace the virtuous cycle of climate leadership

Climate action is a shared responsibility that requires the private and public sectors to work hand in hand. Let’s reinforce the cycle of continuous growing leadership. Policymakers should seize the moment to lock in the positive effects of bold climate commitments with policy measures across the industry. Policymakers can do so by following the recommendations of the UN Secretary General’s High Level Expert Group’s Integrity Matters report and the UNEP FI recommendations specifically for financial institutions, which recommend the following state-of-the-art practices for credible net-zero commitments from financial institutions:

  1. Align with science-based, no/low overshoot 1.5°C scenarios
  2. Align with the assumptions and criteria of the scenarios (including by sector) as soon as possible
  3. Establish near-term (ideally 5-year) targets
  4. Commit to transparent reporting of GHG emissions and their allocation to real-economy inventories
  5. Establish an appropriate emission scope, striving for full coverage as soon as possible
  6. Strive for real-economy impact, enabling the transition
  7. Require neutralisation of residual emissions
  8. Finance the transition
  9. Provide transparency on metrics, underlying scenarios and methods used to classify products as sustainable, including appropriately disclosing the sustainability impact of products and services
  10. Identify unique purpose implementation
  11. Disclose transparently and comprehensively the scenarios, metrics, and targets employed, and disclose progress ideally annually

Each article in this series explores one of the above recommendations to support policymakers in understanding the progress to date and how to scale up the transition to a global net-zero economy.