Climate-focused investor group Net Zero Asset Owner Alliance (NZAOA) has banned its members from counting CO2 removal schemes toward their emissions reduction goals before 2030 amid increasing criticism of the market for carbon offset.
The UN-convened group, which controls $11 trillion in assets, said on Jan. 31 that it wanted members to focus on encouraging investee companies to bring down emissions across all industries instead of removing CO2 that has already been emitted.
The ban comes following widespread concerns about CO2 removal schemes’ quality and criticism of companies that purchase carbon credits instead of reducing their carbon footprint. A recent investigation by the Guardian claimed that 90% of rainforest offset credits issued by Verra were “worthless.”
On the other hand, the United Nations has said that CO2 removal will be necessary to slow or stop climate change by mid-decade.
NZAOA’s new policy applies to the investor group’s members and the companies in which they invest. For the long term, the group still wants its members to invest in the development of a CO2 removal certificate market that is liquid and accountable.
“Investments in high-quality carbon removals will encourage demand and the development of the market,” Jessica Andrews, UNEP FI investment lead and senior project manager for NZAOA, told Reuters. “However (…) we expect members to prioritize real-world abatement at least until 2030.”
Not all investors support this prescriptive approach, Reuters reported.
Maria Nazarova-Doyle, head of pensions investments and responsible investments at Scottish Widows, said that while offsets could not substitute climate action, she could see the benefits of taking early action and financing conservation and nature projects. “If it’s about protecting forests, it may be that you get to 2040/2050 and there’s no forest to protect anymore.”