Asset owners are increasingly committing to net-zero emissions in their portfolios by or before 2050, but it is a huge and complex undertaking. What do asset owners need to consider as they start on their decarbonisation journey?
As anyone who has tried to transform part of their business knows, managing change is hard. Succeeding takes a thorough understanding of the issue, solid planning and motivated, knowledgeable teams.
Implementing a portfolio decarbonisation strategy is no exception. Asset owners working towards a net-zero target need a high-level understanding of their portfolio so they can figure out which holdings have the most material impact on the overall carbon footprint, even before working out a detailed framework and identifying gaps and key actions.
But perhaps the hardest part is dealing with uncertainty. Climate change will not let up while investors finalise their frameworks. There is little choice but to “build as you learn”, making incremental improvements and including more asset classes as the industry finds ways to incorporate them into the net-zero transition.
Indeed, no single asset owner or asset manager can do this on their own; the whole industry needs to collaborate. The good news is most participants are keen to work together to tackle the issue, as shown by the growing membership of net-zero initiatives.
No single asset owner or asset manager can do this on their own; the whole industry needs to collaborate
This transformation also requires considerable resources and specialised skills, such as expertise in climate science and data, carbon accounting, green technologies and negative emissions, sector decarbonisation, climate policy, and stakeholder engagement, to name a few.
Using these lessons as a starting point and drawing on the expertise we have acquired to date, this paper explores practical considerations for asset owners aiming to reach net zero in their portfolios, looking at the quantitative component and how we move from a high-level commitment to implementing the strategy: where to begin; short-term versus long-term plans; the implications for investment strategies; measurement challenges; and building flexibility into plans.
Download ‘So, you’ve set your net-zero target: What next?’ to understand:
- Where to begin, what actions to take in the short term, and what to consider for the long term
- The key investment considerations
- How to manage the challenges and build flexibility into plans