Carbon offsets - What role do they have to play in the race to reach net zero?

In 2019, only 16 % of the global economy was estimated to be covered by net zero targets, increasing to 68 % by 2021.

ESG investing is falling in popularity among UK investors

However, not all net zero pledges are created equal and we as investors have a role to play in examining the viability of the targets our investee companies have set themselves to ensure they are playing their part in the fight against climate change. While there is no single definition of net zero and no single framework for measurement, the Science-Based Targets Initiative (SBTi) has published the following definition of corporate net zero in its guidance:

• Reducing scope 1, 2 and 3 emissions to zero or to a residual level consistent with achieving net zero emissions at the global or sectoral level in eligible 1.5°C aligned pathways
• Neutralization of any residual emissions in the net-zero target year and all greenhouse gas emissions released into the atmosphere after that year

The first point in the definition, while not without problems, is the clearer ambition for many companies and will have the greatest short-term impact on emissions.

Many of the companies we speak to have been able to carry out initial assessments of their carbon footprints and have used these to set preliminary targets that will see substantial reductions in emissions in the short term. (Amelia Overd)