By Simon Jessop

LONDON (Reuters), Wednesday’s United Nations call for world’s largest economies to make sure that net zero obligations made by financial institutions are robust and backed by science, ending financing for fossil fuel projects.

This is the first direct guidance that the UN Environment Programme Finance Initiative has given to the G20 regarding the topic. It comes just days before crunch climate negotiations in Glasgow, Scotland.

UNEP FI presented 11 recommendations to policymakers ahead of G20 meetings. They were addressing how to best oversee industry efforts in order to cut greenhouse gas emission by mid century.

Some are concerned that the pledges made are not strong enough after an August landmark U.N. Climate Panel report. The panel issued a “code Red for Humanity” and urged faster actions from nations to curb emissions.

According to Jesica Andrews (UN EPFI’s investment leader), “In the past two years, we have just seen an amazing explosion of net zero commitments,” she told Reuters.

This is the first time that we have done a state-of-the art assessment. We made concrete recommendations about how financial institutions can set a credible net zero target.

Against this backdrop, UNEP FI stated that financial institutions must align themselves with a scientific-based scenario (or several) and provide transparency about the ones they used.

Andrews stated, “What’s challenging is how to define science. And that’s why this paper is here; it sets out how science should be applied in order for that commitment to be credible.”

“If policymakers wish to embrace this, and to have more comparability between them, that is what they need to be asking financial institution to do,” she said.

To achieve the global goal of limiting global warming to 1.5 degrees Celsius, it was crucial that firms begin to align their lending activities as quickly as possible.

According to the report, “This would include, among other things, an immediate cessation or rapid decommissioning fossil fuel production according to the scenarios.”

The institution should set five-year goals and provide an annual report on progress. They also need to apply appropriate paths to zero to incentivize their subordinate companies to take action.

Andrews explained that although there have been a lot portfolio-level targets set, and a lot more commitments at the top to net zero, the focus is not being drawn down to the sector levels. This will be what makes a real difference in the economy.