The Net-Zero Donut methodology
Presentation
The Net-Zero Donut study focuses on the following three major Net-Zero alliances:
- The Net-Zero Asset Managers initiative, with 315 signatories and total assets of USD 64 trillion
- The Net-Zero Asset Owner Alliance, with 86 signatories and total assets of USD 9,500 billion
- The Net-Zero Banking Alliance, with 138 signatories and total assets of USD 74,000 billion.
The aim of the study is to highlight the asymmetries between the practices and recommendations of the GFANZ, the alliances and their signatory members, and other existing voluntary and regulatory reporting frameworks, in order to propose all the indicators needed for the proper internal and external monitoring of a Net-Zero commitment.
We have based ourselves on the general GFANZ framework and its 5 main pillars: Foundations, Governance, Implementation Strategy, Engagement Strategy and Metrics & Objectives, so as not to create confusion around a new framework and to enable GFANZ and the alliances to grasp our recommendations.
This initial study was limited to the three main alliances and their French members who joined them before 2023. Future editions will aim to extend the approach to all alliances and their members.
The data collection and analyses carried out as part of the Net-Zero Donut are the fruit of human endeavour. It is possible that some data points may have escaped the attention of the analysts who worked on the project, which is why we specify ‘not found’ rather than ‘not reported’. That said, these shortcomings cannot always be attributed solely to human error, but also to the clarity of the presentation of information in the reports and corresponding policies of the players. Indeed, the accessibility of information plays a vital role in stakeholders' understanding of NZ targets, which is why we are calling for the publication of an annual public document bringing together all the data related to NZ ambition.
Reading keys
- The Net-Zero Donut is made up of all the indicators selected for each alliance, represented by a coloured area and classified into the 5 categories of the GFANZ NZTP.
- It is available in 3 different versions, one for each Net-Zero alliance included in the scope of the study.
- The framework displayed by default includes all the Net-Zero Donut indicators, taken from the recommendations of the alliances and other reference frameworks. It is also possible to display a view that includes only those indicators inspired by the recommendations of the respective alliances of financial players.
- Each indicator is modelled by a thin trapezoid representing the alignment or misalignment of the financial player with the reference framework, and follows the following colour code:
- Data found with a reference framework: from Red to Green
- Data found but without a reference frame: Violet
- Data not found: Grey
- Indicator not applicable to the actor: White
- The indicator is more or less broad according to its degree of importance established using two sources:
- A review of around thirty external managers in a study of greenwashing indicators commissioned by WWF.
- A working group dedicated to the Net-Zero Donut, bringing together a government agency, researchers and thinktanks.
- The dotted circle represents the target to be reached. It delimits the area of the ideal donut for a financial institution analysed through the prism of the Net-Zero Donut.
Building
Step 1: Inventory of reference frameworks and indicators useful in analysing climate strategies
We deciphered the recommendations of each of the alliances studied by linking them to indicators relating to the GFANZ reference framework, the NZTP. We then analysed the recommendations of other frameworks: GFANZ, CA100+, SBTi, HLEG, ACT Finance, UN, PCAF, Carbone 4, GHG Protocol, SBTi-FI (2023), TCFD, WWF, not forgetting the publications of our Scientific and Expert Committee and our own framework for analysing commitments resulting from four years of monitoring ESG commitments in France.
We thus extended our data collection framework to around 200 indicators per alliance, before selecting between 114 and 151 that we considered essential, depending on the alliance.
This phase of the study was carried out within the framework of a LIFE Finance ClimAct project working group, and in open consultation with public, private, academic and NGO stakeholders, a list of whom can be found in the Acknowledgements section.
Step 2: Gathering information and building a public database of Net-Zero committed players
Gathering information from French players who have signed up to one of the three alliances before 2023 according to the three grids developed, based on three levels of public documentation:
1: Player publications dedicated to the decarbonisation objectives set within the framework of their alliance AND data available on the alliance website
2: Policies adopted by the players contributing to the achievement of their decarbonisation objectives (coal, oil and gas, commitments, voting, etc.)
3: Regulatory publications (29LEC report, voting report, commitment report, DPEF, TCFD report, etc.).
Step 3: Analysis and evaluation of the data published by the players.
In addition to the quality of the data collected, the Observatory attaches great importance to transparency. This is an essential step in any approach to reducing the carbon footprint of players. This is why the results presented here are expressed in binary terms: either the corresponding data has been found, or not.
However, we felt it was essential to create an evaluation framework for the indicators, so that we could analyse in detail the interim reporting of the players and monitor their progress. To do this, we reviewed the recommendations of the following frameworks: HLEG, PCAF, GHG Protocol, CA100+, SBTi-FI, as well as the ACT methodology recognised by the UNFCCC for the transition section in particular.
We have finally been able to find an analysis framework for 70% of our indicators, the results of which can be found on the Observatory website, both in raw data and in the form of the Net-Zero Donut.
We have identified indicators without an evaluation framework as a limitation of this study and are calling for participation to help us define an evaluation framework for each missing indicator over the coming months.
Glossary
