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Net-Zero Emissions: The Steps Companies and Investors Can Consider



Net-Zero emissions

The Steps to Net-Zero Emissions

To help prevent the worst effects of climate change, a growing number of companies are pledging to achieve net-zero emissions by 2050. In fact, the percentage of companies declaring a net-zero target nearly doubled from 2019 to 2020.

With urgency building, how can companies and investors approach net-zero emissions? The above infographic from MSCI highlights the steps these two groups can take, from defining a strategy to reporting progress.

Net-Zero Emissions: A Clear Process

Setting a net-zero emissions target means reducing carbon emissions to the greatest extent possible, and compensating for the remaining unavoidable emissions via removal.

Companies and investors can take four broad steps to move toward their targets.

1. Define Strategy

To begin, companies can measure current emissions and identify priority areas where emissions can be reduced. For example, ABC chemical company determines that its greenhouse gas (GHG) emissions far exceed those of its competitors. In response, ABC chemical company prioritizes reducing GHG emissions during material processing.

Similarly, wealth and asset managers can assess climate risks:

  • Risks of transitioning to a net-zero economy
  • Risks of extreme weather events

They can then map out a strategy to curb climate risk. For example, XYZ asset manager determines that 33% of its portfolio may be vulnerable to asset stranding or some level of transition risk. XYZ decides to lower its transition risk by aligning with a 1.5 degrees Celsius (2.7 degrees Fahrenheit) warming scenario.

2. Set Target

With a strategy set, companies can pledge their net-zero emissions commitment and set interim goals. They can also specify how their pledge will be achieved. For example, ABC chemical company could set a net-zero emissions target by 2050. To increase short-term accountability, they set an interim target to halve carbon emissions by 2035.

Wealth and asset managers can also set targets and interim goals, as they apply to their portfolios. For instance, XYZ asset manager could set a goal to decarbonize its portfolio 5% by 2025, and 10% by 2030. This means that the companies within the portfolio are reducing their carbon emissions at this rate.

ScenarioWarming Potential
Business as usual3.6℃ (6.5℉)
10% decarbonization1.5℃ (2.7℉)

As shown above, a 10% year-on-year decarbonization will align XYZ asset manager’s model portfolio with a 1.5 degrees Celsius warming scenario.

3. Implement

ABC chemical company takes immediate action consistent with its interim targets. For instance, the company can start by reducing the carbon footprint of its processes. This approach carries the lowest risks and costs. But to take larger strides toward its net-zero emissions goal, ABC could draw on renewable energy together with carbon-removal technologies as they are developed.

In the same vein, XYZ asset manager can move toward its decarbonization targets by adopting a benchmark index and reallocating capital. This could include:

  • Increasing investment in clean technologies
  • Re-weighting securities or selecting those that are “best in class” for ESG metrics
  • Reducing risk exposure and targeting companies for shareholder engagement
  • Selling holdings in companies with the greatest exposure

All of these actions will help XYZ become better aligned with its investment strategy.

4. Track and Publish Progress

Here, the actions for companies and investors converge. Both groups can measure and monitor progress, disclose results, and adjust as necessary.

For example, XYZ asset manager shares the following year-end results of its decarbonization strategy. The results compare the portfolio and its benchmark on their implied temperature rise and exposure to low-carbon transition categories.

(Portfolio - Benchmark)
Implied temperature rise3.2℃ (5.8℉)3.4℃ (6.1℉)-0.2℃ (-0.4℉)
Exposure to companies classified as:
Asset stranding0.0%0.5%-0.5%
Product transition6.1%8.1%-2.0%
Operational transition5.2%7.0%-1.8%

Asset stranding is the potential for an asset to lose its value well ahead of its anticipated useful life because of the low carbon transition. Companies with product transition risk may suffer from reduced demand for carbon-intensive products and services, while companies with operational transition risk may have increased operational or capital costs due to the low carbon transition.

XYZ asset manager’s portfolio has less risk than the benchmark. XYZ has also significantly reduced its exposure to transition risk to 11.3%, down from 33% in step 1. However, with an implied temperature rise of 3.2 degrees Celsius, the portfolio is far from meeting its 1.5 degrees Celsius warming goal. In response, XYZ begins to intensify pressure on portfolio companies to cut their GHG emissions by at least 10% every year.

A Climate Revolution for Net-Zero Emissions

The time to drive the transition to net-zero emissions is now. By the end of this century, the world is on track to be up to 3.5 degrees Celsius warmer. This could lead to catastrophic flooding, harm to human health, and increased rates of mortality.

As of July 2021, just 10% of the world’s publicly listed companies have aligned with global temperature goals. Preventing the worst effects of climate change will demand the largest economic transformation since the Industrial Revolution. Companies, investors and other capital-market participants can drive this change.

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Mapped: The Global Reliance on Harmful Cooking Fuels

In this graphic, we map the number of people relying on harmful cooking fuels by region, using data from the World Health Organization.



harmful cooking fuel reliance by region



The following content is sponsored by Carbon Streaming Corporation

Mapped: The Global Reliance on Harmful Cooking Fuels

While safe and clean cooking fuels are often readily available in the Western world, over 2 billion people globally lack access to these resources, instead depending on coal, kerosene, wood, and charcoal for their cooking needs.

These fuels, however, have deleterious impacts on human health, climate, and the environment, leading to millions of premature deaths each year and contributing significantly to global CO2 emissions and forest degradation.

To explore this topic in further detail, we partnered with Carbon Streaming Corporation to map the number of people without access to clean cooking alternatives, regionally, according to data from the World Health Organization (WHO).

The Two Billion People Without Access to Clean Cooking

Access to clean cooking fuels and technologies is unevenly distributed worldwide.

The majority of individuals (>95%) in North America, Europe, Australia, and New Zealand enjoy access to clean cooking fuels and technologies.

However, access is a lot lower in many parts of the world. Let’s now take a look at these regions.

RegionNumber of people without access to clean cooking, 2021Share of population without access to clean cooking, 2021
Sub-Saharan Africa935 million82%
Central and Southern Asia723 million35%
Eastern and South-Eastern Asia433 million19%
Latin America and the Caribbean76 million12%
North America and Europe48 million4%
Western Asia and Northern Africa40 million7%
Oceania (excluding Aus. and NZ)11 million85%
GLOBAL2.27 billion29%

With a staggering 935 million people, Sub-Saharan Africa has the highest number of people lacking access to clean cooking. This is more than 80% of the 2021 population.

On the other hand, 85% of the population of Oceania, excluding Australia and New Zealand, lacks access to clean cooking, but because of their smaller population this “only” adds up to 11 million people.

Closing the Gaps

With millions of annual deaths linked to cooking with harmful fuels, in addition to the millions of metric tons of CO2 emissions produced by their combustion, ensuring equitable access to cleaner and safer cooking options is important not just for the health of communities, but also for our planet.

Carbon Streaming’s Community Carbon project brings fuel-efficient solutions to millions of households in Sub-Saharan Africa by distributing cleaner cookstoves in Mozambique, Uganda, and Tanzania and water purification devices in Malawi, Mozambique, Uganda, and Zambia.


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Contribute to safer cooking and water in Africa by purchasing carbon credits* from Carbon Streaming.

*Each metric ton purchased represents one carbon credit equivalent that will be retired to support the project. Purchased credits will be retired on the applicable registry by Carbon Streaming on behalf of the purchaser.

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