Every year, leaders from countries around the world get together to talk about climate change at large, including net-zero. They call this gathering the Conference of the Parties, COP for short and this year will be the 26th time they meet. During that meeting, leaders will look at how well countries are doing in the fight against climate change and decide what to do next.
We asked Emmanuelle Aubertel, ESG advisor at BNP Paribas Global Markets, to explain net-zero – a key topic that will be at the centre of the conference.
Net- zero has become the new buzzword but WHY are we talking about “net-zero”?
Emmanuelle Aubertel: First, net-zero is not a buzzword. We are already witnessing the impact of climate change – increased wildfires, dramatic flooding and hurricanes. To avoid the worst catastrophic impact, scientists are telling us that we need to limit global warming to 1.5 degrees above pre-industrial levels by the end of the century. To do so, CO₂ emissions must be reduced to net-zero globally by around 2050.
What does “achieving net-zero” precisely mean?
EA: The Intergovernmental Panel on Climate Change (IPCC) – an international body informed by hundreds of leading scientists responsible for assessing the science related to climate change – provided a clear definition of net zero: “Net-zero CO2 emissions are achieved when anthropogenic [i.e. human-caused] CO2 emissions are balanced by anthropogenic CO2 removals over a specified period.” The IPCC’s role is to provide policymakers with regular assessments of the scientific basis of climate change. In addition, they also underlie negotiations at the UN Climate Conference.
In other words, to achieve “net-zero” we need to do two things:
- First, reduce our emissions as much as possible and
- Second, remove from the atmosphere those emissions that we still emit and cannot reduce. These emissions are also called residual emissions (or un-avoided emissions)
To achieve “net-zero”, we need to do two things: reduce our emissions as much as possible and remove from the atmosphere those emissions that we cannot reduce.
Emmanuelle Aubertel, ESG advisor
BNP Paribas Global Markets
In contrast to an absolute-zero target, a net-zero emissions target looks more realistic for some because not only does it aim at reducing emissions but it also aims at retrieving emissions through new emerging technologies that capture and store carbon underground or through nature-based mechanisms which can act as natural carbon sinks (e.g. reforestation, wetlands).
Why is timing so crucial?
EA: There are three reasons why timing is so crucial:
- Firstly, we only have 30 years left to meet the net-zero target. Immediate action will increase our chances of remaining below 1.5 degrees warming by the end of the century
- Secondly, every extra bit of warming matters: the CO₂ emitted today will stay in the atmosphere for a century and will add to our global carbon budget
- Thirdly, to reach net-zero we need to completely transform the global energy system. This is a tremendous challenge because of the natural inertia of our existing energy and economic systems, investment cycle and of our current way of living
Who is taking action?
EA: A number of countries have already committed to reach net-zero by 2050, including the EU, the US, the UK, Japan, and others. It was also a top priority for the G7 Summit this June.
However, governments aren’t the only ones taking action. The private sector has also embarked on this journey as net-zero is becoming a business imperative for both corporates and institutionals.
In the past couple of years, we have seen commitments of the financial industries: the ‘Net-Zero Asset Owner Alliance’, to the ‘Net-Zero Asset Manager Alliance’ and most recently the ‘Net-Zero Banking Alliance’ and ‘Net-Zero Insurers Alliance’. Through these coalitions, investors are pledging publicly to decarbonise and transition their portfolios, which in turn provide strong signals for companies to engage further in the transition to a low carbon-conscious economy. Pledging to become ‘net-zero’ and setting interim targets accordingly increasingly leads to direct impacts on business strategies and investment choices. The transition to net-zero is both a matter of managing climate-related risks and seizing opportunities. According to the International Energy Agency (IEA), to reach net-zero carbon emissions by 2050, annual clean energy investment worldwide will need to more than triple by 2030 to reach around $4 trillion.
How is BNP Paribas Global Markets helping?
EA: At BNP Paribas, we are working hard to accompany our clients in their transition journey through enhanced and privileged dialogue, strategic advisory and the development of tailored solutions.
For our institutional clients, we support them progressively decarbonise their portfolios, (e.g. we have developed a raft of low carbon indices). For our corporate clients, we help them foster and embed their net-zero commitments into their business strategy through financing and hedging solutions linked to achieving climate targets and delivering positive impact.
As for our clients that have already reduced their emissions but are willing to go a step further to address their residual emissions – either for compliance reason or on a voluntary basis – we are able to support them with a very strong expertise in the carbon markets. We are active across the carbon value chain – in compliance markets such as the European Trading Scheme (ETS) or the California ETS in the US, as well as on the emerging voluntary carbon markets.
