A proposed pivot by the Glasgow Financial Alliance for Net Zero (GFANZ) toward funding the Global South’s clean energy transition depends heavily on viable project pipeline, a new report says.
This shift, mooted as part of a repositioning by the alliance in Q1 2025, responds to the “chronic under-allocation” of global capital to low-carbon projects in low- to middle-income countries in the Global South, according to think-tank Sustainable Finance Observatory.
“The approach’s success will hinge on enhancing the pipeline of ‘bankable’ projects, where risk-return profiles meet investor requirements to draw in private capital from GFANZ members,” says the report, which follows the decision of the Net Zero Banking Alliance (NZBA) to cease operations as a member organisation.
According to the think tank, the energy transition of countries in the Global South faces high barriers, including high costs of capital, heightened perception of risk, high levels of sovereign debt, scarcity of concessional financing, and “insufficient local capacities in financial engineering”.
GFANZ plans to support energy transition finance via country platforms which bring public, private, domestic and international finance together behind transition plans focused on a gradual phase-out of fossil fuels, while strengthening national capacities for investment in renewable energies.
“This strategic shift may make it possible to rethink the net zero alliances as tools for systemic transformation, and no longer just as alignment showcases,” it said, noting also the need for policy frameworks such as Europe’s Clean Industrial Deal to generate pipelines of bankable projects.
The report also said that the majority of banks – especially in Europe – have so far maintained their individual sectoral decarbonisation and sustainable financing targets, despite relaxed NZBA rules introduced in April 2025.
Following a vote by members, the NZBA is transitioning to providing non-binding guidance to banks on achieving decarbonisation, having provided guidelines on how banks can achieve Paris-aligned net zero pathways. A requirement for target-setting introduced in April 2024 has now been fully removed.
The alliance suffered a number of high-profile departures earlier in the year, notably among US banks, driven largely by political pressures and the threat of antitrust lawsuits.
“It’s bitterly disappointing to see the biggest banks in the world vote to step away from accountability around their commitments to prevent the worst effects of global heating,” said Jeanne Martin, Co-director of Corporate Engagement at UK-based charity ShareAction.
“Despite some governments and corporates dialling down on their efforts to tackle the climate crisis, public support for climate action remains high and many investors are all too conscious of the massive risks to the economy of a worsening climate.”
