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The Road to Net-Zero: The business case for making a commitment

Hot air or hostage to fortune?

When it comes to net-zero commitments, it’s clear they divide opinion.

The spectrum is wide. At one extreme, net-zero opponents brand commitments as a ‘pointless distraction’ from what the business is expected to achieve. At the other, accusations of greenwashing permeate the discussion as net-zero commitments are seen as worth little more than the paper they’re written on.

And with so many conflicting views, it’s perhaps understandable that the rate of new commitments from financial services firms has slowed to a trickle.

So, what’s next for net-zero? And where does that leave the firms who've already made a commitment? Despite significant advancements in disclosure frameworks in recent years, firms' progress on net-zero remains difficult to unpack. Globally, mandatory disclosure rules are largely still being drafted and voluntary disclosures to date lack full standardisation.

Despite this, enough firms have made a net-zero commitment - and enough time has passed since they did - for us to see what happens when they do. That’s why Deloitte and the Institute of International Finance (IIF) launched an in-depth survey of 135 financial sector firms with respect to their net-zero journeys – to cut through the noise and find out what’s really going on. You can read our full report here: ‘Road to Net-Zero’.

The rest of this blog answers these three questions:

  • What happens inside firms when they make a net-zero commitment?
  • How does their climate change readiness compare against firms with no such commitment (and firms with plans to commit still in development)?
  • Can committing to net-zero can be rational for a firm?

The noise around net-zero

Since 2021, plenty of firms have made net-zero commitments. Across the financial sector, alliances have been created to foster collaboration and drive net-zero GHG emissions by 2050 or sooner. The Glasgow Financial Alliance for Net-Zero (GFANZ) is a global coalition of leading financial institutions committed to accelerating the decarbonization of the economy. The group was formed in April 2021 and today has over 550 members from more than 50 countries – all of which have made net-zero commitments as part of signing up.

But as Figure 1 shows, some of that early momentum has slowed. Like all the GFANZ sub-groups, the Net-Zero Banking Alliance (NZBA) grew rapidly after launch, with membership rising strongly around the COP26 climate conference in October 2021. However, by COP27, those increases had tailed off. While part of this trend may be due Russia’s invasion of Ukraine, and the associated energy and cost of living crises, there are surely wider trends at play.

On one side of the debate, there are calls to abandon the very concept of net-zero commitments. According to this perspective, voluntary action on climate change is a ‘pointless distraction’ and in some cases contrary to what companies should be expected to deliver. Wait for the legislation, advise these naysayers. Don’t expose your business and its leaders to needless legal risk.

There are indications the financial sector may be bowing to this pressure, with alliances diluting their rules around fossil fuel financing, as well as notable instances of firms revoking their membership due to viewing those same rules as overly-stringent.

From the opposite side, some climate activists are scathing of the credibility of net-zero commitments made. According to Catherine McKenna (Canada’s former environment minister), too many pledges are “little more than empty slogans and hype”. Meanwhile, a UN report from November 2022 called Integrity Matters urged financial services firms to “draw a red line under greenwashing”.

Some of the world’s most climate-conscious banks are even threatening to withdraw their membership unless the alliances reverse this trend and tighten their rules around fossil fuel finance.

A reason for optimism: Net-zero commitments make a difference

Against this contested backdrop, our survey reached two clear conclusions.

  • There are striking differences in the progress made on climate change by firms that have made a net-zero comment, firms that are thinking about it, and firms that have not.
  • These differences are highly likely to benefit the firms that have made such a pledge, as they demonstrate greater preparedness for the climate transition.

We split the firms in our survey by region, sector, and size. But no matter how we cut the data, the same trend emerged. Financial sector firms that have publicly committed to net-zero (NZC firms) show consistently higher preparedness to meet the climate challenge and profit from the immense opportunities of the transitioning world.

The effects are pervasive – from higher levels of product innovation to faster progress on sourcing the required data. A commitment adds invaluable impetus to a firm’s net-zero efforts and appears to catalyse transformative action, keeping up momentum when inevitable challenges arise.

Tone from the top is the first indicator of a successful net-zero commitment. When done correctly, an announcement on net-zero can mobilise your entire business. NZC firms report a far clearer, more consistent, and more forceful ‘tone from the top’ on why net-zero is important and the role of the firm in achieving it. The effects are felt from the CEO and boardroom to divisional heads and middle managers.

Achieving net-zero by 2050 is a multi-year marathon and not a short sprint. Making a commitment sends a signal to every business function that they’ll need to play their part. Our results show that progress is far more advanced in NZC firms, where all the key business functions are rated between highly and moderately involved in executing the net-zero strategy. That’s in stark contrast to firms still mulling or without such a commitment.

Moreover, NZC firms report much more progress in updating their roles and responsibilities to allocate net-zero tasks. Over half of such firms say they have at least partly updated individual staff members’ job descriptions so that they are aware of their specific responsibilities relative to net-zero. That compares to less than one third of firms considering making a pledge and less than one in ten of firms with no clear intention.

Furthermore, NZC firms are far more likely to use net-zero performance metrics to reward and incentivise their staff. They report significantly higher reference to net-zero goals in scorecards, bonus schemes and long-term incentives – and we shouldn’t be surprised. Clear and meaningful incentives on sustainability are just one way that business leaders are motivating and encouraging people from the ground up to act on net-zero.

We know from our interviews with Chief Sustainability Officers (CSOs) that making a net-zero commitment pushes firms to define and resolve their data issues. The same conclusion is evident from our survey. When we asked firms without a commitment about the accuracy and completeness of their net-zero data, almost all of them said it was ‘too soon to say’. That’s in stark contrast to NZC firms, who have a far clearer idea where their data issues are lurking – the vital first step in being able to resolve them.

Our final finding concerns shadow carbon pricing. The only firms in our survey who said they were applying it widely were firms that had made a commitment (and even then, there weren’t many). However, 39% of NZC firms said they were considering doing so, nearly double the share of firms where a commitment is ‘in development’ and ten times higher than at firms with no such pledge.


A CSO we interviewed for this survey put it like this: “CEOs are used to making big calls. It’s like when they say they’re going to cut $5 billion from their cost base. They don’t know, ahead of time, every last detail of the plan. First, they do some analysis, then they go public—and then they work out how to get it done”. Today’s CEOs can’t predict every step of their net-zero journey. What’s increasingly clear, however, is that making a public commitment can be a rational way to start to pursue such a goal.

Our research finds substantial real-world impacts from making a commitment, including establishing new roles, developing new products, and overcoming weaknesses in data.

In short, making a net-zero commitment can galvanise a firm and mobilise its problem-solving mindset (and this problem isn’t going anywhere).

To find out more on how financial institutions are approaching net-zero, check out ‘The road to net-zero’ report.

Translating climate ambition into transformative action through transition planning

Coming out of COP27, with the release of transition planning recommendations by GFANZ and Transition Plan Taskforce (TPT), there is now a clear approach for the private sector to shift gears from setting targets to taking action against their climate commitments.

Transition plans represent the next big step financial institutions can take on their climate journey –translating their ambitions and targets into transformative action. It is vital that firms now give this priority to leverage the opportunities of the transition, manage their climate risks, meet any commitments they have made, and to meet stakeholder expectations.

The development and disclosure of credible and actionable transition plans to achieve their climate commitments will be a key priority for financial services firms, regulators, and industry bodies in 2023.

To find out more about transition plans, check out the latest blog in our TPT series ‘Taking aim at transition planning? Start with strong foundations.