There are many roads to Paris – let us not impose a single route to net-zero

This begs the question: should there be a set definition, or does this risk leading to a situation where the world is chasing a single uniform approach to net-zero?

Sometimes a focus on labelling can distract from what is most important, as it could be argued it is more important that net-zero goals encourage the right behaviours.

Reducing emissions is not the only way

Setting 2050 net-zero targets within the pensions industry are to be welcomed, but we need a greater sense of urgency injected into the debate

Avoided emissions are good things, whether or not they are additive. Of course, we need to avoid double counting, but we can hopefully all agree we want capital to move towards wind and solar and, in due course, battery technology and green hydrogen.

The same questions can be posed over negative carbon. Every Paris-aligned transition pathway relies on carbon being extracted from the atmosphere, so we need to incentivise capital to flow into nature-based carbon sequestration assets, like reforestation.

But there is a limit to the land mass that can be reforested and so we also need to encourage capital to move to technology-driven carbon sequestration.

How about carbon credits? Many organisations are already using carbon credits in their net-zero journey.

Rather like avoided emissions, credits can be additive, provided they are not used as an excuse for not taking some other action towards net-zero.

Well-chosen carbon credits can improve biodiversity, improve flood protection or, crucially, support a just transition and do those things right now, in a way divesting from or engaging with oil companies will not achieve.

Here are two key principles that should guide our thinking about avoided emissions, carbon credits and negative carbon:

• Do not use avoided emissions, carbon credits or negative carbon to avoid taking action that otherwise could be taken.

• Assess the value of your actions against their impact in the real world as well as on the fund.

Exclusion or engagement?

At the heart of the ‘greening the fund’ versus ‘greening the world’ debate are questions about exclusion and engagement.

We are encouraged to engage, but there are also instances where exclusion may be better for the world and for members.

Incumbents may not succeed in adapting to the new world. The Innovator’s Dilemma argues that it is very hard for incumbents to commercialise disruptive technology because it is often only practicable for new entrants.

In 1988, General Motors announced research into electric vehicles, but in 2002 it sued the state of California to unpick the very limited legislative support for electric vehicles, and by 2005 it was trying to (literally) crush its electric vehicles.

Without the competitive threat, and with Tesla being subsequently created as a new entrant, would we have seen the renewed enthusiasm for electric vehicles from the incumbents that we are today?

We now believe more must be done to achieve change in the real world. We want to challenge businesses’ licence to continue to operate as corporate citizens without radical alterations in their approach and change current political discourse.

Engagement alone is not going to lead to a carbon tax to ensure much of the oil already discovered stays in the ground. 

More urgency needed

Setting 2050 net-zero targets within the pensions industry are to be welcomed, but we need a greater sense of urgency injected into the debate.

Targets without a transition investment strategy are not sufficient, nor are transition strategies that do not require significant action now.

If we had started immediately after James Hansen’s testimony on climate change to the US Congress in 1988, we would have needed to decarbonise at only 2 per cent a year to limit warming to 1.5C.

But the time for incremental change has passed — we now need to remove 12bn tons of carbon from the atmosphere each year.

Cushon’s 2026 net-zero investment ambition, its use of carbon offsets to deliver its proposition, and its seeking out of avoided emissions and negative carbon are all part of the company’s attempt to change the terms of the debate and take action now.

Because there is no one set route to Paris, and we should all have started the journey already.

Julius Pursaill is scheme strategist at Cushon