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Net zero assets are investments aligned with the goal of achieving net zero greenhouse gas emissions by 2050. They are related to activities or projects that actively contribute to the fight against climate change.
Net zero assets are investments aligned with the goal of achieving net zero greenhouse gas emissions by 2050. The purpose is to reduce as much as we can the carbon released in the economy and make sure that any remaining emissions are offset by removal efforts. Net zero assets are related to activities or projects that actively contribute to the fight against climate change. These assets of net zero CO2 can include renewable energy projects, carbon capture and storage facilities, and European Union Allowances (EUAs) from the EU emissions trading scheme. A net zero asset portfolio can include energy-efficient real estate, green bonds, sustainability-focused shares, and diversification products like carbon allowances. The UN-convened Net-Zero Asset Owner Alliance, comprising institutional investors, aims to align their portfolios with the goal of limiting global warming to 1.5°C. Members commit to substantial CO2 reductions, and the alliance supports regulated carbon pricing as part of broader climate action strategies.
The net zero objective means that no additional volumes of CO2 are released into the atmosphere by 2050. It is the goal of achieving a balance between the greenhouse gasses emitted into the atmosphere and those removed from it. This means reducing greenhouse gas emissions as much as possible and offsetting any remaining emissions. The ultimate aim is to limit global warming to well below 2 degrees Celsius above pre-industrial levels, as outlined in the Paris Agreement.
A net zero asset is an investment through a financial instrument that is aligned with the goal of achieving net zero greenhouse gas emissions. This means that over its lifecycle, the activities that are relative to the existence of this asset do not produce additional volumes of CO2 by 2050. Under the denomination of “net zero assets” can fall the following financial instruments:
An investor may opt to construct a net zero portfolio, reflecting their commitment to addressing the urgency of climate change. This involves identifying asset allocations (like carbon allowances), that provide financial returns while fully aligning with the global net zero objectives.
In an exclusive interview for Homaio, Arnaud Giraudon, a professional impact investors, gave an example of a green asset portfolio investment, as follows:
The Net-Zero Asset Owner Alliance (NZAOA), convened by the United Nations, is composed of institutional investors dedicated to aligning their investment portfolios with net zero greenhouse gas (GHG) emissions by 2050. Their priority is for their financial investments to be in line with limiting global temperature rise to 1.5°C.
As per Antonio Guterres, the UN Secretary General, “The Net-Zero Asset Owner Alliance, the gold standard for credible commitments and transparent targets, is managing USD 10 trillion in assets and catalyzing change across industries”.
The alliance members have established common targets, aiming for CO2 reduction ranges of 22% to 32% by 2025 and 40% to 60% by 2030. Each member of the alliance has the autonomy to come up with their individual commitments regarding the additional ambition of their portfolio. Since its inception, 69 alliance members have completed and submitted such additional reporting templates outlining their targets. As of April 2024, 83 members have disclosed targets aligning with the Alliance's common Commitment.
The United Nations Environment Programme Finance Initiative (UNEP FI) and the Principles for Responsible Investment Initiative (PRI) are tasked with collaborating with financial institutions to promote science-based climate change action. Also, the alliance collaborates with research institutes, think tanks, and non-governmental organizations (NGOs) to develop data-backed climate and finance statements aligned with cutting-edge impact investing strategies.
On May 24th this year, the alliance published a report on regulated carbon pricing, emphasizing that the expanding ETS (Emissions Trading Systems) worldwide is getting strengthened. Similarly to the report on the State and trends of carbon pricing in 2024 by the World Bank, the net zero asset owner alliance members underlined that higher regulated carbon prices truly correspond to the current environmental reality.
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