The Target
The Net-zero Carbon (NZC10) target was developed to meet scientific climate requirements. A number of governments, companies and investors currently aim for net-zero emissions by 2050, which is estimated to be consistent with 1.5°C to 2.0°C of warming. Many initiatives adopted by sustainable investors reflect a 2050 aspiration. Our NZC10 target embodies a higher level of climate ambition with a 2030 net-zero goal. This 2030 target is consistent with keeping with keeping global warming below 1.5°C. Sustainable fund managers can use NZC10 to demonstrate leadership on global warming.
The Net-Zero Carbon 10 (NZC10) target requires that 10% or more of portfolio assets are invested in companies that:
- Are already carbon neutral or have net-zero carbon emissions, or
- Have strategies using current technologies to achieve net-zero carbon emissions by no later than 2030, or
- The fund manager is actively engaging with the firms to meet point B.
The target offers clarity to fund and portfolio managers by proposing actions that investors can take within a standard framework. The intention is to tighten standards following climate science under the guidance of our ethical oversight committee.
To promote genuine leadership, NZC10 has a 2030 net-zero emissions target. In the low carbon transition, many firms will be late adopters, reaching net-zero only after 2050, if at all. Ethical and sustainable investors need to encourage companies to become net-zero well before 2050, both to reduce emissions and provide social leadership. The 2030 target embodied in NZC10 expresses a climate ambition consistent with keeping warming below the lower 1.5°C aim of the Paris Agreement. The NZC10 target is designed to be challenging yet achievable for commercial fund managers, to maximise impact.
For investors, including fund managers and portfolio managers, adopting NZC10 incurs no charge, However, those wishing to adopt it must register with P1 Investment Management (P1). P1 monitors the target to ensure standards are maintained, and that the NZC10 designation is not misused.
What's Next
The Net-Zero target proposes actions that investors can take to support the movement towards a net-zero emission economy and provides a standard framework for corporate engagement. The participating managers show how investing can address climate change. Recent UK Climate Change Committee recommendations for carbon-neutrality by 2050 seem ambitious, but many climate scientists advise stronger action. Working with scientists, we are undertaking a ‘gap analysis’ on how future NZC targets can more closely align with the climate requirement.
Although the emphasis on carbon neutrality by 2030 is ambitious, there are other aspects to consider for protecting the climate. Potential areas for development include the proportion of portfolio assets covered, methods of engagement, collaborations between investors, improved offsetting requirements and verification.
The fund managers who have already adopted the target are keen to move beyond the initial 10%, to 20%. Developments will follow climate science under the guidance of P1’s external ethical oversight committee.
Adoption of targets such as NZC allows a ‘silent pro-climate majority’ of investors to express their views. Apart from individuals with savings, this can include pension funds, trusts and charity funds.
Enhanced NZC targets will be challenging yet achievable, leaving no one behind. The existing NZC target will remain for existing users and as a stepping stone for investors who wish to adopt it later on.
