The Net-Zero Asset Owner Alliance’s Target-Setting Protocol is a foundational document that created a framework for reporting and delivery on short-term climate targets. Since the launch of the Inaugural Target Setting Protocol, the document – and thus the expectations for members – have become more comprehensive and robust (see also the Target Setting Protocol Second Edition).
The third version reflects the latest science, expands methodological coverage across asset classes, provides further details for some of the Alliance’s four target types, and adds chapters on carbon removals and just transition.
- Latest science: TSP V3 bases its requirements for Alliance members on the climate modelling published in the Intergovernmental Panel for Climate Change (IPCC)’s latest Assessment Report (AR6), released in April 2022. Based on IPCC’s no and low overshoot 1.5°C scenarios (c1 category), the Alliance identified a global average absolute emissions reduction requirement in the range of -22% to -32% by 2025 (SR1.5) and -40% to -60% by 2030 (AR6). The outgoing range for target year 2025 was developed in 2020 and is therefore still based on IPCC’s Special Report 1.5°C, which was released in 2018.
- Expansion of methodological coverage: In addition to asset classes covered in previous editions of the Protocol, TSP3 introduces overarching principles for target setting in private assets, a reporting framework for sovereign debt accounting in line with latest guidance by the Partnership for Carbon Accounting and Financials (PCAF); and carbon accounting and target setting for direct commercial real estate mortgage loans. With increased portfolio coverage, a larger share of members’ assets under management is encompassed by concrete decarbonisation targets.
- Added granularity: TSP V3 includes updated language to clarify engagement target setting and elaborates on recommended metrics for setting sector targets.
To consult the Alliance’s approach on concrete questions related to the Protocol, please see the FAQ and for more detail, please consult the Annex.
The lead authors of the Protocol – Claudia Bolli, Head of Responsible Investing at Swiss Re Group Asset Management and Udo Riese, Global Head of Sustainable Investing at Allianz Investment Management have also written a note of reflection on progress so far and on what is to come. Read more about the Alliance’s working track leads here.