Category: net-zero target

Net-Zero Emissions: The Steps Companies and Investors Can Consider


This post is by Jenna Ross from Visual Capitalist


Net-Zero emissions

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.

2. Set Target

With a strategy set, companies can pledge their net-zero (Read more...)

A Complete Visual Guide to Carbon Markets



The following content is sponsored by Carbon Streaming Corporation.



Carbon

A Complete Visual Guide to Carbon Markets

Carbon markets enable the trading of carbon credits, also referred to as carbon offsets.

One carbon credit is equivalent to one metric ton of greenhouse gas (GHG) emissions. Going further, carbon markets help companies offset their emissions and work towards their climate goals. But how exactly do carbon markets work?

In this infographic from Carbon Streaming Corporation, we look at the fundamentals of carbon markets and why they show significant growth potential.

What Are Carbon Markets?

For many companies, such as Microsoft, Delta, Shell and Gucci, carbon markets play an important role in offsetting their impact on the environment and meeting climate targets.

Companies buy a carbon credit, which funds a GHG reduction project such as reforestation. This allows the company to reduce their GHG emissions over a given time frame. There are two main types of carbon markets, based on whether emission reductions are mandatory, or voluntary:

Compliance Markets:
Mandatory systems regulated by government organizations to cap emissions for specific industries.

Voluntary Carbon Markets:
Voluntary systems where carbon credits can be purchased by those wanting to offset their emissions.

As demand to cut emissions intensifies, voluntary carbon market volume has grown five-fold in less than five years.

Drivers of Carbon Market Demand

What factors are behind this surge in volume?

  • Paris Agreement: Companies seeking alignment with these goals.
  • Technological Gaps: Companies are limited by technologies that are available at scale (Read more...)

Evaluating a Company’s Net-Zero Carbon Target



The following content is sponsored by MSCI.

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Evaluating a Company’s Net-Zero Carbon Target

A net-zero carbon target is a climate essential.

Companies from Apple to Microsoft are making commitments to halve their emissions by roughly 2030—and eliminate them altogether by 2050. These targets follow the recommendations set forward by the Paris Agreement in order to avoid devastating climate conditions for future generations.

However, not all targets are rigorous, let alone feasible. To shine a light on this problem, MSCI developed a Net-Zero tracker that helps investors analyze the strength of company targets.

What is Net-Zero?

Net-zero refers to driving down greenhouse gas emissions (GHG) to zero by mid-century.

To achieve this, processes such as carbon removal, carbon reduction, renewable alternatives, and energy efficiency will aid in the transition to carbon neutrality. To date, at least 50 countries and 21% of the largest corporations worldwide have set net-zero targets.

Net-Zero Carbon Analysis

MSCI developed a framework centered on two primary criteria:

 ComprehensivenessAmbition
DescriptionDoes the target focus on the majority of a company’s emissions?How much and how quickly does a target aim to reduce emissions?
Key Components% of company footprint covered by targets

Unit

Target scopes
Projected target emissions against net-zero trajectory in 2030 & 2050

Intention to use carbon offsets

Target year

Thanks to its standardized framework, the analysis helps investors evaluate all companies’ net-zero targets on the same components.

The Net-Zero Dataset

Where is data drawn from, and what determines the net-zero score?

Using MSCI’s Climate Target and Commitments dataset, the drivers of carbon emissions fall into scope 1,2, and 3 emissions. Here is a hypothetical example of how these emission are analyzed:

Drivers of EmissionsDescriptionReported/ EstimatedEmissions (Mega tCO₂e)
Scope 1Direct emissionsReported0.04
Scope 2Indirect emissions from purchased energyEstimated0.18
Scope 3Value-chain emissions*Estimated
Reported
12.47
11.17

* Both upstream (supply chain) and downstream (use of a company’s products)

For investors looking to sincerely address climate change and reduce their portfolio emissions, the Net-Zero Tracker lets investors compare commitments with other companies, informs their climate risk profile, and report portfolio emissions according to frameworks such as the Task Force on Climate-Related Disclosures.

The Net-Zero Scorecard

The Climate Target and Commitments dataset tackles two key issues:

  • Identifies disparities in a company’s net-zero carbon target
  • Identifies the main sources of carbon emissions for a company

Sometimes, companies will set lofty net-zero pledges without having systems of short-term accountability. In other cases companies will set targets that exclude segments of their business.

Let’s consider the following hypothetical leading company, whose net-zero carbon target covers 100% of their business and has 3.8% projected emission reductions annually.

Net-Zero ScorecardKey ComponentsValue
Comprehensiveness% of company footprint covered by target

Unit

Target scopes
100%

tCO₂

1,2,3
AmbitionProjected reduction per year to meet stated target

Intention to use carbon offsets

Target year
3.77% p.a.

No

2030

With a target year of 2030, the company’s net-zero commitment covers all scope 1, 2, and 3 emissions. For these reasons, the company’s net-zero target is credible and has short-term accountability.

Green Credentials

As the year 2030 closes in, there is hope that business as usual will become even less viable.

Companies who refuse to acknowledge the climate crisis will likely face greater pressure from shareholders. Financial markets may reward those with achievable climate strategies. The net-zero carbon target tracker allows investors to think critically as they play a part in this transition.

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