Halving portfolio emissions by 2030: The New UN-Convened Net-Zero Asset Owners Alliance Target Setting Protocol is released

It is clear that in order to avert unprecedented disruption to our lives, livelihoods, businesses and economies, our world must decarbonize with extreme speed. That’s why today, I am pleased to share that at the UN-convened Net-Zero Asset Owner Alliance, we are releasing our second?Target Setting Protocol.?Members of the Alliance, including 69?institutional investors collectively managing US$10.4 trillion, will now be required to make more ambitious portfolio emission reductions, and will continue to take imperative climate action.

?The?first edition of the Protocol?focused on interim targets for 2025, and reflected commitments from 30 Alliance members to set Paris Agreement-aligned portfolio targets. The Net Zero Asset Owner Alliance is therefore one of the only groups of large institutions that has set, and is implementing, targets to achieve 2025 targets on emission reduction.?Interim targets such as this are key to monitoring and making progress, that’s why Alliance members are required to publish ambitions interim targets on a five-year cycle.

?As we look towards the near future, the 2022 protocol is raising the bar for 2025 targets, and introducing 2030 targets. For example, on a on sub portfolio level, reduction targets are now a minimum of at least 22%, instead of 16% in the first Protocol. Further clarity is also provided on targets, and the Protocol provides direct actions that members must take to enable a real-economy transition towards a?1.5°C pathway?with low/no overshoot. This concept has also been further specified, accepted pathways can only include 1.5 degrees, with a maximum overshoot of 0.1 degree, in other words – the smallest overshoot possible. The Protocol is backed by detailed analysis of climate change scenarios to help guide members. It stresses the need for powerful, credible and rapid action to achieve a net-zero emissions world.

?Since the last edition, the 2022 Protocol has also grown and broadened its focus, expanding the covered sectors. This will lead to an increasingly complete coverage of the economy. One example of this is the expansion of asset classes. Infrastructure is a newly covered asset class, and the first steps towards sovereign debt are now included. The target setting scheme for infrastructure is based on the carbon accounting framework for project finance laid out by PCAF (Partnership for Carbon Accounting Financials). Furthermore, there is now?a more ambitious reduction range for sub-portfolio targets.?Ambitions to reduce portfolio emissions have been enhanced, and are aligned with the scenarios underlying the?latest IPCC report.?This means on the path to 2030, Alliance members will be required to?reduce portfolio emissions within a range of?49% to 65% (from a 2020 baseline).?Also, the?number of high-emitting sectors covered by Protocol has doubled to 14 and includes chemicals, concrete and agriculture. It also contains a list of key asks for companies and asset managers, to be used in climate-related engagements. It is hoped that advanced guidance from this Protocol will help investors already committed to net-zero to take the urgent shorter-term action, that climate science demands.

?Beyond the Protocol, substantial developments have occurred around the Alliance. Membership has doubled and the assets managed have grown significantly. At the beginning of 2021, there were 34 institutional investors, representing USD5.1 trillion assets. Now (25 January 2022), there are 69 institutional investors, representing USD10.4 trillion. This is just one positive step that signifies investors are?increasingly recognizing that strong economies and fighting climate change are intertwined. Collaboration is most effective when the agenda is jointly driven across the globe via various projects, initiatives and positioning. However, there is still much work to do. This starts with unleashing the pent-up energy within the commitments of our members, and these efforts by themselves will not be anywhere near enough to confront the existential risk posed by the climate emergency.?

?Action is needed, and every company, bank, insurer and investor is challenged to follow the lead of the Alliance members, to adjust business models, develop plans for the transition to a low-carbon, climate-resilient future and then implement those plans. This is not the time for complacency. It is certainly not the time to discuss whether 1.5 degrees must be achieved and if interim steps need to be defined. We – every company – needs to act powerfully, credibly and quickly and, not least, together to support governments to achieve a net-zero emissions world.