A climate change-focused investor group that manages $39 trillion in assets said it advises its members that carbon offsets should not be the primary solution to greening their portfolios.
Businesses cannot offset their way to net zero, and real emissions reductions will need to happen to tackle climate change, the Asia Climate Change Investor Group said in a response to questions .
Carbon offsets (or reductions or elimination of emissions to offset those elsewhere) have come under increased scrutiny in recent years over whether they are truly effective in combating climate change and because of the lack of standards industry commons. Shell Plc recently renewed a controversial attempt to sell “carbon neutral” natural gas by buying credits to offset the fossil fuel’s environmental impact.
“Using offsets may be an easier option for buyers, but they are not risk-free,” said the group, which includes BlackRock Inc., BNP Paribas Asset Management and JPMorgan Asset Management Inc. among its members. “Prosecuting the use of poor quality schemes, including those with negative social and ecological impacts, can create reputational risks.”
If offsets are used, investors should pursue long-term carbon removal where there are no technologically or financially viable alternatives to reduce emissions, the AIGCC said. Failure to reduce emissions will increase the risks of the energy transition for businesses and economies, he said.
The UN-convened Net-Zero Asset Owner Alliance, a group of institutional investors that manages a pool of $11 trillion, also said last month that it discourages its members from using carbon removal initiatives to meet its emissions targets by 2030.
