In this article, we examine the main net zero frameworks, their common threads and what they mean in practical terms for investors. In particular, we outline the concrete steps that investors can take to make their portfolios “net zero aligned”.
“Net zero” means that the total greenhouse gas (GHG) emissions being emitted should be lower than or equal to the total GHG emissions being removed or absorbed. On a net basis, no additional emissions should be released into the Earth’s atmosphere.
Carbon neutrality is a related concept that means that an entity has offset its emissions by purchasing carbon credits or offsets equal to the amount of its emissions. This can be equivalent to “net zero” emissions, if and only if, the offsets are derived purely from removal of CO2 emissions and not from “avoided emissions”.
Scientific models that target a temperature rise of less than 1.5°C over and above pre-industrial levels show that we need to achieve net zero emissions by the year 2050.