GFANZ criticisms raise fossil fuel divestment debate

January 25, 2023

Concerns over greenwashing, and the current reality of fossil fuel investment and divestment, have been raised again in an analysis of the Glasgow Financial Alliance for Net Zero (GFANZ) by a collective of 15 NGOs under the banner of NGO and think tank Reclaim Finance. 

The group’s report revealed many firms are continuing to finance the development of fossil fuels, despite joining the GFANZ - a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy.

In total, 229 of the largest fossil fuel developers have received finance from the 161 GFANZ members to support the development of new oil and gas fields as well as pipelines and LNG terminals.

While the report provides a useful reflection of the progress, or lack there-of, towards a net zero finance industry in the UK and the world, it take a one-sided view in the debate over divestment.

Lucie Pinson, executive director and founder of Reclaim Finance, said:

“It is business as usual for most banks and investors who continue to support fossil fuel developers without any restrictions, despite their high-profile commitments to carbon neutrality.” 

 The report found that 58 of the largest asset managers of NZAMI held at least $847bn of stocks and bonds in 201 major fossil fuels developer, not reflecting the move towards divestment that the reports authors had hoped to see.

Despite these figures, and such activity being labelled “business as usual”, the findings of the report do not fully highlight the reality of energy transition.

For instance, many commentators have argued that outright divestment from fossil fuel companies would not provide a long-term solution with other investors simply buying these stakes up.

It should also be noted that GFANZ and other climate-related initiatives have shifted investor expectations of how their funds are managed, and how companies are engaged on climate-related issues. Rather than divesting, investors can use the shares they hold to push through change through voting their shares at company annual general meetings each year.

A a proxy voting service provider, Minerva knows the importance of having your say on sustainability, and climate change stands as the highest priority on the minds of many of our voting clients.

Voting and stewardship efforts are both more effective ways of changing company behaviours, and dealing with issues such as company greenwashing, and GFANZ is built on these assumptions.