Net zero

Net zero has become something of a standard for trustees looking to nail their ESG colours to the mast, but it is not always clear what is meant by such a commitment, nor what trustees should be thinking about when deciding whether to make one. It looks good on paper, but what is really involved in the implementation of a net zero commitment?

What is Net zero?

Net zero refers to achieving balance between the amount of greenhouse gas (GHG) emissions produced and the amount of GHG removed from the atmosphere. When human activities add no more GHG emissions than we take away, we reach net zero. Achieving net zero is vital to tackle climate change by reducing global warming. What we do in the next decade to limit emissions will be critical to the future.

What questions does this raise for trustees?

Pension scheme trustees have a fiduciary duty to exercise their investment powers for the purposes of paying members’ pensions and taking account of relevant (usually financially material) factors. But can trustees apply these principles to prevent the companies they invest in from engaging in business strategies that have a negative impact on people and planet, thereby improving the chances of their members retiring into a <2°C world?

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