Mainstreaming net-zero emissions in investment and business strategies

Research has underpinned three principles for climate-conscious investment in the fossil fuel industry: committing to net-zero emissions, developing a profitable net-zero emissions plan, and setting quantitative mid-term targets.

 

Issue

Since its 5th Assessment Report (AR5) published in 2013, the Intergovernmental Panel on Climate Change (IPCC) has emphasised that stabilising global temperatures and remaining with the available global carbon budget requires net CO₂ emissions to fall to zero. Work by colleagues in the School of the Environment showed that AR5 had significantly underestimated the available carbon budget.

 

Approach

A research team used AR5’s estimated carbon budget to identify the ‘2°C capital stock’ – the global stock of infrastructure which, if operated to the end of its regular economic life, implies global mean temperature increases of 2°C or more (with 50% probability) – for the electricity sector. This led them to argue that policymakers and investors should question the economics of new, long-lived energy infrastructure involving positive net emissions and adapt long-term investment accordingly.

Subsequent research set out principles around net zero investment for the fossil fuel industry, its investors and its customers. These were published as the Oxford Martin Principles for Climate-Conscious Investment.

 

Impact

The publication of the three Principles of ‘committing to net-zero’, ‘developing a profitable net-zero business plan’ and ‘setting quantitative mid-term targets’ was accompanied by extensive engagement with many different stakeholders to ensure the Principles would be effective at shifting institutional investment practice. The research has so far resulted in changes in the investment strategies of three globally active investment managers and the business development strategies of two major fossil fuel companies (BP and Shell). It has also led to changes in the thinking and strategic action regarding institutional investment among the University of Oxford, the Oxford Colleges and the Bishop of Oxford.

 

More information

• Read the full impact case study in the REF21 database

Institution: University of Oxford

Researchers: Professor Cameron Hepburn, Professor Myles Allen