After COP26 Banks are to Deliver on Ambitious Net Zero Targets

COP26 was held in Glasgow in early November 2021. COP26 was the 26th annual “Conference of the Parties”, that is, the meeting of countries that are signatories to the United Nations Framework Convention on Climate Change (UNFCCC).

This year’s COP marks the beginning of a shift of these conferences from making rules and identifying the underlying issues causing climate change to implementing concrete actions that will limit the rise in global temperatures.

With 197 countries bringing different perspectives to the conference table and several items to discuss, COP26 negotiations were complex. This year’s COP readily accepted the key findings of the report of the Intergovernmental Panel on Climate Change (IPCC): limiting global warming to 1.5 C will require rapid, deep, and sustained cuts to greenhouse gas (GHG) emissions, requiring that carbon dioxide emissions fall to 45 percent below 2010 levels by 2030, and reach net zero by 2050.

IFC’s Green Banking Academy (GBAC) is an online banking knowledge initiative designed to help financial institutions and the private sector in Europe and Central Asia (ECA) learn about green banking and build green portfolios. GBAC advisory services are available to help financial institutions align with the goals of COP26. IFC offers the tools and support that financial institutions will need to ensure that they are able to measure, report on, and decrease the levels of GHG emission contained within their portfolios.

“I think today we can say with credibility that we’ve kept 1.5 (degrees Celsius) within reach. But its pulse is weak, and we will only survive if we keep our promises.”
Alok Sharma
British Politician and COP26 President

Climate Finance at the COP

This year’s COP included direct and focused attention to climate finance, with a goal of increasing investment from both the public and private sector. The third day of the conference was titled “Finance Day” and was officially devoted to climate finance. 

Glasgow Climate Pact

At the close of the conference, delegates agreed to several points. One of these is a commitment to doubling financing for adaptation to climate change. Financing for limiting or decreasing climate change often receives more attention, however, as global climate changes, industries, infrastructure, and individuals will need financing to adapt to the changing world.

This year’s COP made progress with respect to fossil fuels, with participants agreeing to phase out inefficient fossil fuel subsidies. Some observers were disappointed when, just before the document was finalized, language around the use of coal was altered from a plan to “phase down” rather than “phase out” coal use. Still, the use of language as strong as “phase down” with respect to the world’s use of coal is unprecedented, and progress has been made.

The 197 countries participating in COP26 agreed to report back on progress to next year’s COP27, to be held in Egypt. All countries have been asked to bring more ambitious pledges next year. 

International Sustainability Standards Board (ISSB)

Coinciding with COP26, a new International Sustainability Standards Board (ISSB) was announced by the International Financial Reporting Standards Foundation. The ISSB will be based in Frankfurt, Germany, and will set standards for companies reporting progress with respect to climate and other environmental and social goals. These uniform standards will help to create certainty and transparency for investors.

Glasgow Financial Alliance for Net Zero (GFANZ) 

The GFANZ is an alliance of financial institutions first launched in April 2021, with a goal of uniting the financial sector to take action to limit climate change. The companies included in this alliance represent $130 trillion of private sector finance committed to meeting science-based targets to limit GHG emissions. In total, this alliance includes 450 finance firms from 45 countries.

“Right here is where private finance draws the line. We now have the essential plumbing in place to move climate change from the fringes to the forefront of finance so that every financial decision takes climate change into account.”

Mark Carney

UN Special Envoy on Climate Action and Finance

Vice Chair and Head of Transition Investing, Brookfield Asset Management

Net Zero Banking Alliance (NZBA)

The Net Zero Banking Alliance (NZBA) is GFANZ’s banking component. The alliance includes 95 banks from 39 countries. These banks represent 43% of global assets, in total $66 trillion. The alliance is led by banks and administered by the UN secretariat. NZBA members are primarily banks from North America and Western Europe, including some large international corporations which are active in Europe and Central Asia, such as Credit Agricole, ING, and Deutsche Bank AG. However, the majority of smaller banking institutions in the ECA region are not NZBA members. Committing to recognized global initiatives like NZBA may provide banks in the region with green credentials to attract new clients and expand existing portfolios.

Banks that are not members of the United Nations Environment Programme Finance Initiative (UNEP FI) must pay a membership fee to join the NZBA. For non-members, fees are approximately half of the UNEP FI membership fees, and are proportional to bank size. 

Banks joining the NABA must make the following commitments: 

  • Banks must commit to transitioning their lending and investment portfolios to align with the global need to reach net zero emissions by 2050 or sooner.
  • Within 18 months of joining, members must set portfolio emissions targets for 2030 and 2050. The 2050 target must include intermediary targets for each five years from 2030 on.
  • Members’ targets for 2030 should focus on priority sectors. That is, banks should focus on the sectors of their portfolios that are the most greenhouse gas intensive. 
  • Alliance members must agree to publish an annual review of the absolute emissions associated with their portfolios, as well as to report on their progress towards transitioning to a low-carbon future.

Setting NZBA Targets

The alliance has set out four principles for members as they develop GHG targets for their portfolios.

  • Targets must be disclosed and must meet the goals of the Paris Agreement.
  • Banks must first establish an emissions baseline for their portfolios, then report their portfolios’ emissions profile annually in future years. 
  • Banks must use science-based decarbonization scenarios to set emissions targets in line with the Paris Agreement. 
  • Members must review targets regularly. 

NZBA members are not required to use any one specific methodology to measure their portfolios’ emissions. However, they are asked to use credible methodologies that can be explained. Banks may use carbon offsets to meet targets. Guidelines in this area recommend that carbon offsets be limited to carbon removals, and that the offsets be certified.

“We must acknowledge that progress was made. There are now new opportunities for countries to deliver on what they know must be done to avoid a climate catastrophe. But unless they sharply pivot to implementation and show substantial results, they will continue to have their credibility challenged.”

Manuel Pulgar-Vidal

WWF Global Lead of Climate & Energy

Measuring and Monitoring Portfolios’ GHG Emissions

Banks can use IFC’s Climate Assessment for Financial Institutions (CAFI) tool to assess the climate and development impact of their investments. When CAFI users input information about existing and potential projects into this digital platform, CAFI will estimate the project’s greenhouse gas emissions. CAFI can be used to estimate the climate impact of an entire portfolio.

IFC can work with your institution to measure the climate impact of your existing portfolio and prepare your organization to produce annual climate impact reports. IFC is also able to help your organization reduce your impact on the climate to ensure that the goals of COP26 are met and the global rise in temperature is limited.

Start Your Green Journey 

For more information about GBAC or to schedule an assessment of your climate capabilities, please email to contact a member of our ECA GBAC team. We are looking forward to working with you. Stay green!

For more information about the Net Zero Banking Alliance, please contact Sarah Kemmitt ( and Alice Anders (