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Today, the UN-convened Net-Zero Asset Owner Alliance releases the fourth edition of the Target-Setting Protocol, which for the first time covers the majority of major asset classes across investment portfolios and will govern the next five years up to the critical milestone of halving emissions by 2030.
This latest protocol is streamlined into a standing document, to be updated as new methodologies evolve no more frequently than every twelve months.
The protocol demonstrates that its members remain firmly committed to achieving net zero for all greenhouse gas emissions by 2050 and aligning with 1.5°C pathways, with no or limited overshoot. Under their commitment, members shall target 40 to 60 per cent GHG emissions reductions by 2030 (compared to 2019) in line with IPCC Sixth Assessment Report estimates.
The new protocol expands coverage to additional private assets (private debt funds, directly held private debt, directly held real estate debt funds and residential mortgage loans), covering all private assets to ensure that high-emitting companies develop transition plans regardless of their ownership structure. Increased climate scrutiny of large and publicly traded companies may push some actors to sell brown assets into the less transparent private market. Only a harmonised approach to listed and non-listed ownership structures can mitigate this risk. From this year, members’ decarbonisation strategies are set in motion across nearly the entire investment portfolio, a key requirement to meet their climate commitments, according to the Alliance.
Under the latest guidance, all members are required to set the next round of five-year targets, the so-called “2030 targets”, which will cover the period 2025-2030. Current member targets cover 2020-2025; now this year, ahead of the Alliance Reporting Cycle, members must set their second five-year target, in line with Article 4.9 of the Paris Agreement.
More immediate, short-term targets are necessary to ensure members stay on track for delivering on their climate commitments. By setting them on a five-year cycle, the Alliance mirrors the governmental process of enhancing Nationally Determined Contributions (NDCs) every five years. The Alliance aspires to support and encourage governmental ambition on achieving the goals of the Paris Agreement and striving for limiting global warming to 1.5 °C.