Setting a Net-Zero Target
An interactive tool for visualizing net-zero alignment
5 minute read Investors who aim to align their portfolios with net-zero emissions by midcentury may wonder how quickly their investments need to decarbonize to achieve that goal. This interactive tool developed by MSCI’s Climate Risk Center can help.
- Stress testing net-zero transition scenarios
- An interactive tool for visualizing net-zero alignment
- Using scenario analysis for climate change
- Making sense of greenhouse gas emissions types
- Untangling corporate decarbonization targets
- Setting interim emissions-reduction targets
- A checklist for climate-aligned investment portfolios
Aligning with net-zero in practice
The Net-Zero Target-Setting Tool below shows the year in which a portfolio’s greenhouse gas emissions are likely to reach net-zero based on the strategy, scope of emissions covered and rate at which a portfolio is set to decarbonize annually. Users also can factor in investments in offsets and their impact on the target date. The interactive visualization can be set to the reflect a dozen MSCI Climate Indexes, which illustrate a variety of approaches to addressing climate change.
As the tool suggests, it’s one thing to set a decarbonization rate, it’s another to deliver on it. Less than a quarter of the world’s listed companies cut their carbon intensity by at least 10% every year – the amount that companies need to cut each year on average to align with a 1.5°C warming scenario – in the five years that ended Dec. 31, 2020.
Net-Zero Target-Setting Tool
Index illustrations (please see disclaimer below) - Max 4
Portfolio value**
Scope 3 25%
Select the percentage of Scope 3 emissions (indirect emissions that occur in a company's value chain)
Decarbonization 12%
Select a decarbonization rate (yearly index reduction in total emissions)
Offset amount
Enter the amount of carbon to be actively offset per year in tons of CO2
Advanced controls
Scope 1 100%
Select the percentage of Scope 1 emissions (direct emissions from owned or controlled sources)
Scope 2 100%
Select the percentage of Scope 2 emissions (indirect emissions from the purchased energy/cooling)
Offset Method
Select the way carbon is offset
Offset Price
Enter the price to offset a ton of CO2 equivalent emissions
Offset Price Increase
Enter the annual price increase to offset a ton of CO2 equivalent emissions
Offset Ratio 20%
Select the percentage of overall emissions offset at the portfolio level
| INDEX | Net-Zero Year | Emissions Now | Offsetting Now | Net Emissions Now | Offsetting Cost Now | Relative Cost Now | Reduction by 2030 | Reduction by 2040 | Reduction by 2050 |
|---|
*MSCI Climate Paris Aligned Indexes are designed to align with a 1.5° scenario using MSCI Climate Value-at-Risk and an ongoing self-decarbonization rate of 10% year on year.
**Hypothetical portfolio that replicates the selected index or indexes
Disclaimer
This tool is for informational purposes only. This information is subject to MSCI Inc's and MSCI ESG Research LLC's terms of use that you can find here: Terms of Use and here Additional Terms of Use - MSCI ESG Research LLC.
This information may not be used for investment decision making purposes or as a basis for any financial instruments or products (including, without limitation, passively managed funds and index-linked derivative securities) or other products or services, to manage any funds or portfolios, to verify or correct data in any other compilation of data or index, to create any derivative works, nor to create any other data or index (custom or otherwise), without MSCI's prior written permission.
