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Setting a Net-Zero Target

Setting interim emissions-reduction targets

clock 5 minute read

The target date of many corporate climate targets is nearly 30 years away. Owners and managers of assets, companies and other capital-markets participants are mapping out interim targets for cutting carbon emissions across portfolios.

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Interim targets can help organizations calibrate the GHG emissions they reduce as the transition to net-zero unfolds. The TCFD recommends that organizations that set medium- and long-term targets should have five- or 10-year targets as well. That aligns with the Paris Agreement, which requires countries that have ratified it to submit emissions-reduction plans every five years.

As part of their goal of keeping global warming at 1.5°C this century, members of the Net-Zero Asset Owner Alliance and Net Zero Asset Managers Initiative have committed to publish interim emissions-reduction targets for their holdings every five years. The Net-Zero Asset Owner Alliance, for example, has set out a four-part target-setting structure that comprises:

  • Engagement targets, with a focus on the highest-emitting companies in their portfolio
  • Sector targets, with a near-term priority on emissions-intensive companies in oil and gas, utilities, shipping and transportation
  • Sub-portfolio targets, including the goal of reducing emissions by between 16% and 29% on publicly listed companies and corporate debt by 2025
  • Financing transition targets, including reporting their progress on carbon-negative investments

Members of both groups have committed to set interim targets that take account of Scope 1 and 2 emissions for their holdings, together with Scope 3 emissions from portfolios, to the extent possible.

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