The global transition to a net-zero economy is a complex and multifaceted challenge, requiring a comprehensive and coordinated policy response. A recent report by the Taskforce on Net Zero Policy has shed light on the progress and shortcomings of current policy reforms, highlighting the need for a more holistic approach that addresses the interconnected issues of nature, adaptation, and social justice.

Unlocking the Potential of Net-Zero Policies: Overcoming Barriers and Driving Systemic Change

Assessing the State of Net-Zero Policies: Gaps and Opportunities

The Taskforce on Net Zero Policy's inaugural report paints a sobering picture of the current state of policy reforms, with the overall progress deemed "substantially insufficient" to put economies on a pathway to hold global warming below 1.5°C. The report's assessment of over 1,000 policy instruments across the G20 reveals that key themes, such as nature, adaptation, and social issues, are not being adequately addressed in net-zero policies.One of the most concerning findings is the lack of stewardship policies that directly link to climate change. The Taskforce found that only the UK has a code in place that articulates this crucial connection. Additionally, the report highlights the uneven adoption of policies, with high divergence across markets in terms of scope, depth, and ambition, as well as overall comparability.

Expanding the Scope of Net-Zero Policies: Integrating Land-Nature, Adaptation, and Social Justice

The Taskforce's co-chair, Andrea Meza Murillo, emphasizes the need to address the "blind spots" in current net-zero policies. She stresses that no transition can be fully effective without considering the interconnected issues of land-nature, adaptation, and social justice. By facilitating corporates and financial institutions to orient their activity and account for these critical factors, policymakers have an opportunity to mount a truly systemic response to the transition, one that benefits economies and societies worldwide.The report's accompanying deep dive into the Just Transition concept underscores the importance of interconnected justice and the cross-border impact of climate and nature transition policies. It calls on governments to better coordinate on the Just Transition and for policies to expand from a "Do No Significant Harm" approach to a "Do More Good" mindset.

Aligning Policy and Finance: Overcoming the Barriers to Transition Finance

The challenges in net-zero policy reforms are further compounded by the barriers faced in transition finance. A new report from the Official Monetary and Financial Institutions Forum (OMFIF) reveals that global asset owners "overwhelmingly" cite policy as the biggest obstacle to investing in the transition.The OMFIF survey and interviews with pension and sovereign wealth funds highlight the need for clarity, certainty, and incentives from policymakers to facilitate investment in transition finance. Respondents also emphasized the importance of ensuring that policies are aligned with transition goals, as the divergence in net-zero targets across markets creates uncertainty and implicit commitments to divest.

Collective Action and Collaboration: Driving Systemic Change through Financial Institutions

In the face of these challenges, financial institutions are taking proactive steps to drive the transition to a net-zero economy. The Global Alliance for Banking on Values (GABV), a network of 25 member banks, has collectively endorsed the Fossil Fuel Non-Proliferation Treaty Initiative, which proposes a global binding plan to end the expansion of new coal, oil, and gas projects, and manage a global transition away from fossil fuels.Additionally, the Sustainable Insurance Forum (SIF), an alliance of global insurance supervisors, has called on insurance supervisors to advocate for a global baseline of transition planning standards. The Forum's report on the supervision of insurance-related transition plans underscores the nascent state of tracking, monitoring, and disclosure requirements in this area, despite the growing recognition of transition planning as a critical part of insurance risk management.

Streamlining Disclosure and Enhancing Interoperability: Collaborative Efforts in Climate Reporting

In a move to improve the transparency and comparability of environmental data, the Global Reporting Initiative (GRI) has partnered with climate disclosure non-profit CDP to streamline environmental disclosure. The two organizations have signed an MoU to progress their technical alignment, including a mapping exercise to enhance interoperability and an assessment of CDP's questionnaire and the GRI topic standards for climate change, water, and biodiversity.This collaboration follows a similar announcement from CDP and the EU standards body EFRAG, who have committed to furthering interoperability in 2025 and publishing "comprehensive" mapping. These efforts aim to provide a more coherent and accessible framework for climate-related disclosures, empowering stakeholders to make informed decisions and drive the transition to a sustainable future.