• Third edition of Target-Setting Protocol published, setting out pathway to reducing portfolio emissions for 84 major institutional investors including Aviva, CDPQ, and Dai-ichi Life
  • Updated methodology now covers private assets target-setting including Commercial Real Estate Lending, and reporting on Sovereign Bonds,
  • Alliance incorporates principles on Just Transition for target achievement while barring carbon removals

31 January 2023, Geneva: Today, the UN-convened Net-Zero Asset Owner Alliance releases a significant update to its Target Setting Protocol, ratcheting up scope and coverage for its 84 members in its third edition of the document.

Investment portfolio emissions typically represent the vast majority of an asset owner’s emissions. The latest Protocol expands its methodology and clarifies its expectations to members, ensuring they set short-term decarbonisation targets that put them on a pathway to reaching net-zero greenhouse gas (GHG) emissions in their investment portfolios by 2050.

The Alliance’s latest Protocol demonstrates that its members remain steadfastly committed to achieving net zero and aligning with 1.5°C pathways with no or limited overshoot.

Based on the Intergovernmental Panel on Climate Change’s (IPCC) most recent pathways, the Alliance identified emissions reduction requirements for sub-portfolio targets in the range of -22% to -32% by 2025 and -40% to -60% by 2030.

Günther Thallinger, Board Member Allianz SE and Alliance said:

“The Alliance continues to enhance depth and coverage with each edition of the Target Setting Protocol, aiming to build a coherent, consistent trajectory aligned to the demands of latest climate science. We show that working towards net zero is possible. It is a matter to decide to do so.


We are observing a divergence of real-economy emission pathways and scientific pathways for limiting temperature rise to 1.5C. With this Protocol the Alliance increases expectations for its members and calls on policymakers and corporates to move in line with science.”

Adding crucial asset classes

Given that data has been less readily available for unlisted equity (compared to their publicly listed counterparts), setting decarbonisation targets for private equity portfolios presents a bigger challenge. However, the latest Protocol formulates the methodology for direct private equity investments and requires members to commence setting targets in 2023 and cover all new private equity assets by 2025.

For the first time, the Target Setting Protocol also includes guidance on carbon accounting for sovereign debt, which is a significant asset class for many asset owners. The Alliance has joined forces with PCAF (Partnership for Carbon Accounting Financials) and ASCOR (Assessing Sovereign Climate-related Opportunities and Risks) to develop the accounting and assessment standards respectively. Once finalised, the methodologies developed will offer investors a tool for a common understanding of sovereign exposure and climate alignment.

Lastly, the Alliance members are also asked to phase in target-setting on new commercial real estate loans using the Carbon Risk Real Estate Monitor (CRREM) 1.5°C national pathways or the IPCC’s no or limited overshoot 1.5°C global range. In 2024, the members will also report the share of the portfolio that is covered by the disclosure target on new investments.

Just Transition focus and limitations on carbon removals

According to the Alliance’s Commitment, members are required to give due consideration to societal impacts when steering their portfolios towards net-zero economy alignment. This year’s Protocol explicitly asks members to consider Just Transition impacts — ensuring the benefits of the low carbon transition are widely and fairly shared — to their decarbonisation targets. When setting Climate Solutions Investment targets, members are encouraged to focus on emerging markets, which typically are most vulnerable to climate change and have fewer resources to transition from fossil fuel dependence.

The Alliance’s stance on carbon removals, previously outlined in the The Net in Net-Zero position paper, have also been incorporated in the target-setting framework. With carbon removal technologies yet to impact at scale, the Alliance guides members to encourage investee companies to prioritise emission reductions and disallows the use of carbon removals to achieve intermediary emission targets that detract from these efforts.

The Alliance aims to continue to enhance the depth and coverage of this Protocol and the public may expect updated editions to be released on an annual basis.

About the UN-convened Net-Zero Asset Owner Alliance

The Net-Zero Asset Owner Alliance is a member-led initiative of 84 institutional investors, with over US$11 trillion in assets under management, committed to transitioning their investment portfolios to net-zero GHG emissions by 2050. The Alliance members were the first in financial industry to set intermediate targets (aligned with the Paris Agreement schedule) and they report on their progress annually. The Alliance is convened by UNEP FI and PRI and is supported by WWF and Global Optimism.