Net Zero (2050): a historic investment opportunity  

Date 13/06/2022
Tipo Uncategorized
strategia net zero

Net Zero has become the main global effort to avoid a climate crisis, but it also represents an investment and innovation opportunity for all sectors of the economy. The concept of net zero emissions emerged at the same time as the Paris Agreement, with the goal of keeping global temperatures below 2°C. The term Net Zero indicates a commitment to reduce emissions to the limit of what is possible, offsetting the remaining emissions through absorption. A growing number of companies, governments and civil society organisations are committing to act together to achieve this goal.   

Key points    

  • The carbon footprint of value chains needs to be measured and analysed in order to set emission reduction targets based on climate science;  
  • There is increasing social, regulatory and market pressure to reduce carbon emissions in projects and investment portfolios;  
  • Climate change is driving market transformation and policy redesign, which presents risks and opportunities for companies in all sectors;  
  • The three essential factors for achieving net zero emissions are: defining the scope, designing socially just strategies and establishing a long-term roadmap.   
  • Although the current Net Zero framework has weaknesses, it is one of the few guides for the private sector to adapt to the transition to a net zero economy by 2050.    

Why is it important to act now to achieve a Net Zero economy?   

The effects of climate change are present and increasingly evident. This is demonstrated by the accelerating transformation of the global financial system, which will impact all sectors of the economy from now on. To prevent the consequences of climate change from worsening, we need to limit greenhouse gas emissions as quickly as possible, which is why more and more countries are moving towards net zero emissions targets.    

Thanks to international agreements, increasing social, regulatory and market pressure, more and more companies have committed to reducing their net greenhouse gas emissions. This is a new area of opportunity for development and investment, as Net Zero targets imply a transformation of markets and a redesign of public policies, which represent risks and opportunities for companies in all sectors.   

How to move towards climate neutrality?   

According to the Science Based Targets Initiative (SBTi), there are two conditions for companies to achieve net zero emissions:   

  • Reduce emissions in their value chain to limit global warming to 1.5 °C;  
  • Offsetting the impact of any source of emissions that cannot be eliminated in equivalent quantities (e.g. carbon sequestration).   

Every company must measure and analyse its value chain footprint, set science-based targets and assess the financial risks and opportunities associated with climate change. To achieve net zero emissions, it is necessary to set precise, measurable, long-term targets that ensure social justice.  

Zero emissions are achieved on the basis of defined, socially just and long-term targets.   

Furthermore, targets should clarify which emission sources are covered by companies, i.e. those from their direct operations or also those generated in their value chain. It is also important to establish the combination of emission reductions, direct removals and offsets. Direct CO2 removals are those under the control of the organisation, while offsets are reductions or removals purchased and realised by someone else, somewhere else. In general, direct emission reductions are preferable. Removal or offsetting strategies are often of uncertain effectiveness and represent a higher risk.    

The social justice approach refers to taking into account each country’s different levels of development and access to finance. Countries with early phase-out tend to have relatively low levels of CO2 emissions, a relatively high GDP per capita, a low current share of non-CO2 emissions and low population density.   

Finally, the long-term roadmap should establish milestones for assessing and reshaping the established decarbonisation plans, which implies monitoring progress through reliable and ambitious performance indicators.   

Risks and opportunities for the future   

There is a real possibility that achieving net carbon emissions by 2050 will not be possible globally, or that it will not be sufficient to keep temperatures below 2°C compared to pre-industrial temperatures. Several voices from the scientific community and environmental activism have spoken out against the Net Zero environmental promise. They question the feasibility of capturing the amount of carbon emissions needed to reach net zero by 2050. The technological solutions proposed so far have proved insufficient, either because of the need for large areas, high costs or simply technical impossibility. 

Another key challenge is to establish rigorous and transparent accounting of emissions and carbon sequestration, with the risk of a proliferation of greenwashing, or false sustainability propaganda, by governments or companies overstating their decarbonisation performance.

Even if climate change scepticism persists, market adjustments will generate risks and investment opportunities that cannot be ignored.   

Despite the doubts surrounding the Net Zero idea, there is no doubt that maintaining carbon emissions at the current level is unsustainable and that capturing carbon emissions from the atmosphere will help limit the negative effects of global warming. Furthermore, government regulations and market value assessments will be increasingly aligned with the goal of reducing and capturing as much carbon emissions as possible.   

In conclusion, even if the global Net Zero goal is not fully realisable, or is insufficient to keep the temperature below 2°C, it is a fact that business and investment plans should take advantage of the opportunities presented by this transition. At the same time, while there is still scepticism about climate change, market adjustments will generate risks that can be mitigated over time. Undoubtedly, the next five years will be decisive for investors who want to be relevant in humanity’s most ambitious transition.   

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