Net Zero

Net Zero and ESG

Net zero represents a dynamic balance of carbon dioxide emissions and absorption and is the climate goal for many jurisdictions by 2050. To slow global warming, the financial industry needs to play a role in net zero financing.

The Glasgow Net Zero Financial Alliance is the world’s largest net zero organization. It includes multiple net zero alliances in the banking, insurance and asset management industries. It aims to encourage the financial industry to provide the necessary financing for companies’ net zero transition.

Global Net Zero Development

The global net zero development has gone through three stages. The first stage is the recognition of the important role of carbon emissions in climate policies, and the unified conversion of greenhouse gases into carbon emissions through global warming potential (GWP).

The second stage is when major countries, regions, cities, and companies begin to set net zero targets. The Paris Agreement has become the basis for many contracting parties to set net zero targets.

The third stage is the implementation phase of the net zero target, and how to effectively formulate, implement, and evaluate net zero is a key concern for regulatory agencies, enterprises, investors, and other stakeholders. The International Organization for Standardization (ISO) plans to develop the first net zero international standard to provide measurement standards.

Net Zero and Transition

From a broad perspective, net zero and transition are usually used simultaneously. However, some industries may not be able to achieve net zero or incur additional costs due to industry limitations, and these industries are referred to as brown industries. Reducing carbon emissions in these industries is crucial for achieving the global net zero, and transition specifically refers to the actions of these industries.

The financial industry plays an important role in the transition of brown industries. Some international organizations, such as the Climate Bond Initiative (CBI), provide classification systems and assessment guidelines for corporate transition to help financial institutions identify and evaluate corporate transition plans.