The Steps to Net-Zero Emissions
To help prevent the worst effects of climate change, a growing number of companies are pledging to achieve net-zero emissions by 2050. In fact, the percentage of companies declaring a net-zero target nearly doubled from 2019 to 2020.
With urgency building, how can companies and investors approach net-zero emissions? The above infographic from MSCI highlights the steps these two groups can take, from defining a strategy to reporting progress.
Net-Zero Emissions: A Clear Process
Setting a net-zero emissions target means reducing carbon emissions to the greatest extent possible, and compensating for the remaining unavoidable emissions via removal.
Companies and investors can take four broad steps to move toward their targets.
1. Define Strategy
To begin, companies can measure current emissions and identify priority areas where emissions can be reduced. For example, ABC chemical company determines that its greenhouse gas (GHG) emissions far exceed those of its competitors. In response, ABC chemical company prioritizes reducing GHG emissions during material processing.
Similarly, wealth and asset managers can assess climate risks:
- Risks of transitioning to a net-zero economy
- Risks of extreme weather events
They can then map out a strategy to curb climate risk. For example, XYZ asset manager determines that 33% of its portfolio may be vulnerable to asset stranding or some level of transition risk. XYZ decides to lower its transition risk by aligning with a 1.5 degrees Celsius (2.7 degrees Fahrenheit) warming scenario.