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Most investors have exposure to heavy-emitting assets, typically in high-impact/transition sectors. Because of this, ‘the emissions of their investments’ are generally the most material scope 3 category.
Much of the focus in investor net zero efforts to date have centered around how investors can address these emissions, whilst understanding that as per all scope 3 emissions, their reduction can only be achieved indirectly through various levers of influence.
These emissions are now generally known as ‘financed emissions’, which are calculated using quantitative metrics developed during early efforts to address climate change in financial portfolios.
Through the development of the Net Zero Investment Framework (NZIF) 2.0, we found that many investors now question the efficacy of setting targets to reduce financed emissions, with some even questioning whether they meaningfully contribute to global decarbonisation efforts. When used in isolation, such targets might inadvertently reduce investments in climate solutions, transition assets, and emerging markets — actions which could slow down climate action.
We provided further clarification on using financed emissions within targets and transition plans in NZIF 2.0, published in June 2024, in collaboration with our members, network partners and the broader investment community. The updated framework builds on the principles of the first, emphasising a practical and balanced approach to portfolio decarbonisation.
NZIF 2.0 is a useful guide for investors to consider when managing their own individual portfolios and, in doing so, can help maximise their practical contribution towards global decarbonisation goals.
Systemic financial risks posed by climate change can only be mitigated by genuine reductions in real economy greenhouse gas emissions. NZIF recommends the two overarching elements of net zero objectives: to support real economy decarbonisation and to increase investment in climate solutions. ...
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