What is Net Zero and why it matters

The Paris Agreement defines net zero as achieving “a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases”.

The IPCC’s report released in August 2021 stated that…“emissions of greenhouse gases from human activities are responsible for approximately 1.1°C of warming since 1850-1900… unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach”.

It is clear therefore that as well as deep and widespread cuts in emissions, there is a fundamental need to remove greenhouse gases from the environment. Carbon dioxide is the only greenhouse gas that can easily be absorbed from the atmosphere. The most effective way to do this is to stimulate nature to absorb more by restoring biodiversity – through afforestation and reforestation.

How far away are we?

This graphic from Climate Tracker below underscores the size of the gap we must grapple with.

How far is the finance sector from delivering on its role?

There can be no doubt that Glasgow made big strides with The Glasgow Financial Alliance for Net Zero (GFANZ), an alliance of banks and asset managers led by former Bank of England Governor Mark Carney, committing to meeting the outcomes from the Paris climate agreement and announcing that more than 450 firms representing ~$130 trillion, or 40% of the world’s financial assets under management, have now signed up to reach and generally promote net zero by 2050. However, where we are now can be seen in The Net Zero Asset Managers Progress Report released on 1 November, in which 43 asset managers set initial interim targets, disclosed that a mere 35% of their assets are managed in line with achieving net zero by 2050. The alliance has 220 signatories with $57 trillion in assets under management.

This article is by Claire Hanratty, Impact and Evaluation Advisor at GoodWolf. Claire is a member of the Responsible Investment Association of Australasia, sitting on their Working Group on Nature. The article is part of a series on COP26.