Investors Shine Light on Realities of Net-Zero

With the Glasgow climate summit looming, net-zero emissions targets are all the rage. But defining and measuring net-zero can be complex. Investors are arguably more advanced than others when it comes to defining what exactly net-zero means, having evaluated plans laid out by publicly listed oil companies as well as debt issuers like national oil companies and producing nations. And what they want is mostly clear: net-zero greenhouse gas emissions by 2050 with interim targets to 2025 and 2030-35, including Scope 3 emissions from products sold; and an explicit strategy on how to achieve this, including a detailed capital expenditure plan. Such demands are making it increasingly difficult for oil companies to justify future growth in oil production. According to the $39 trillion strong International Investors Group on Climate Change, the International Energy Agency's (IEA) Net-Zero by 2050 roadmap is becoming the "basis" for assessing net-zero alignment. That means oil companies will find it harder to convince investors that they can still increase or even maintain production volumes on their way to net-zero. "Beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our [net-zero] pathway," the IEA stated in its May report.

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