• Fourth and most comprehensive edition of Target-Setting Protocol carves pathway to reducing portfolio emissions for 89 major institutional investors, including CalPERS, CDPQ, Nippon Life and Axa, over the next five years. See the full member list here
  • Latest protocol expands to cover all private assets, making it one of the most comprehensive target-setting guidance from a voluntary initiative to date.
  • Through a trial this year, the Alliance takes additional step of assessing sovereign debt, advising use of the ASCOR database.

18 April 2024, Geneva: Today, the UN-convened Net-Zero Asset Owner Alliance releases the fourth edition of the Target-Setting Protocol, which for the first time covers the majority of major asset classes across investment portfolios and will govern the next five years up to the critical milestone of halving emissions by 2030.

This latest protocol is streamlined into a standing document, to be updated as new methodologies evolve no more frequently than every twelve months.

The protocol demonstrates that its members remain firmly committed to achieving net zero for all greenhouse gas emissions by 2050 and aligning with 1.5°C pathways, with no or limited overshoot. Under their commitment, members shall target 40 to 60 per cent GHG emissions reductions by 2030 (compared to 2019) in line with IPCC Sixth Assessment Report estimates.

Full private asset class coverage and new 2030 targets

The new protocol expands coverage to additional private assets (private debt funds, directly held private debt, directly held real estate debt funds and residential mortgage loans), covering all private assets to ensure that high-emitting companies develop transition plans regardless of their ownership structure. Increased climate scrutiny of large and publicly traded companies may push some actors to sell brown assets into the less transparent private market. Only a harmonised approach to listed and non-listed ownership structures can mitigate this risk. From this year, members’ decarbonisation strategies are set in motion across nearly the entire investment portfolio, a key requirement to meet their climate commitments, according to the Alliance.

Under the latest guidance, all members are required to set the next round of five-year targets, the so-called “2030 targets”, which will cover the period 2025-2030. Current member targets cover 2020-2025; now this year, ahead of the Alliance Reporting Cycle, members must set their second five-year target, in line with Article 4.9 of the Paris Agreement.

More immediate, short-term targets are necessary to ensure members stay on track for delivering on their climate commitments. By setting them on a five-year cycle, the Alliance mirrors the governmental process of enhancing Nationally Determined Contributions (NDCs) every five years. The Alliance aspires to support and encourage governmental ambition on achieving the goals of the Paris Agreement and striving for limiting global warming to 1.5 °C.

Günther Thallinger, Board Member Allianz SE and Alliance Chair, said:

 “The fourth and most comprehensive Target-Setting Protocol has been approved by every Alliance member, managing a total of $9.5trn, as we continue to work towards a 1.5°C scenario. This unanimous endorsement underscores the strong commitment of all members to implement their net-zero targets in line with sound science. But we must close the widening gap between our ambitions and the real economy, which is lagging behind science.


 “The Alliance calls for an enabling policy environment—one that supports both investors and corporates in the transition to a low-carbon economy, in line with science and with due consideration of social impacts.”

Piloting sovereign debt assessment

Sovereign debt holdings are a significant asset class for many asset owners, and due to regulatory requirements sovereign debt must often be held for liquidity purposes. However, the asset class can be more challenging to address emissions within, as sovereign debt emissions reflect a country’s emissions. The Alliance seeks to gain a holistic understanding of climate alignment of countries whose sovereign debt asset owners hold, as emissions data alone can provide an unclear picture on who caused or financed them.

Through a pilot this year, the Alliance will supplement carbon accounting with an additional step by assessing sovereign portfolios through a scorecard. Under the Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) database, asset owners will be able to assess governments’ climate-related commitments, policy frameworks and support for a just transition.

The Alliance believes the ASCOR framework will create consistency and harmonisation on the methodology for climate assessment of sovereign debt holdings. As part of the pilot phase of the scorecard, the Alliance will continue to explore the development of other secondary methodologies – such as setting boundary scores – that demarcate sovereign debt portfolios assessed to be climate-lagging, neutral, or leading. The Alliance methodology also considers the stage of development of the country.

Alliance affirms positions on carbon removals, emissions attributions and transition plans

Ahead of when the new protocol comes to term in 2030, members shall not use carbon removals for their own decarbonisation target achievement, instead prioritising emissions reductions, as stated in last year’s Target-Setting Protocol and Net in Net-Zero paper. Members are however encouraged to contribute to a liquid and well-regulated carbon removal certificate market in this period, as well as invest in projects and technologies of durable carbon avoidance and removal, to scale future markets rapidly.

This Background Document, released with the protocol, further draws on the Alliance’s Understanding the Drivers of Investment Portfolio Decarbonisation paper, to help investors identify the factors driving decarbonisation of portfolios, and encouraging the entire industry to undertake such analysis. Understanding where change in emissions derive from is imperative to the Alliance for measuring outcomes and link to real economy impact. In the Background Document to the protocol, the Alliance further elaborates its use for measuring impact of capital allocation strategies on investment portfolio decarbonisation in the next five years.

The Target-Setting Protocol also demonstrates the Alliance’s continued commitment to providing investor support for meaningful reporting and net-zero transition plans. Through A Tool for Developing Credible Transition Plans paper, the Alliance aids members in developing their own transition plans and assess the transition plans of asset managers and investee companies.

About the UN-Convened Net-Zero Asset Owner Alliance

The UN-Convened Net-Zero Asset Owner Alliance (the Alliance) is a member-led initiative of 89 institutional investors, with US$9.5 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 the 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.