Sectoral Pathways to Net Zero

ISF has modelled pathways for industries to take towards the Paris Agreement goal of net-zero

The Net-Zero Asset Owner Alliance (NZAOA) is an international group of institutional investors, representing more than USD 4.5 trillion in assets. Convened by the United Nations, they are committed to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050.

To assist in achieving their goal, the NZAOA is investigating ways to support the companies its members invest in to transition to a low-carbon economy. One tactic is to identify the main industries (sectors) to work with, and to map out what each industry will need to do to get to net-zero.

For this, the NZAOA engaged ISF to gather information about the current state of five sectors and to build on our previous modelling of decarbonisation pathways to develop Sectoral Pathways to Net Zero Emissions.

Identifying the top five

The five sectors that are included in this study are among the highest-emitting sectors as they relate to financial portfolios.

They are:

• Energy, including coal, oil, and gas;
• Utilities, with a focus on power and gas supply;
• Materials in specific steel and cement; and
• Transport, including aviation, shipping, and heavy- and light-duty road travel.

What are the most urgent actions sectors must take?

The report’s key findings emphasise the urgency and importance of each of the five chosen industries’ actions towards decarbonisation and preventing the world’s temperature from increasing past 1.5ºC.

Among the key findings is an emphasis on the Energy and Utility sectors’ influence on other sectors and their responsibility to lead in decarbonising operations.

The Oil, Gas and Coal sectors need to move from extraction and mining of energy resources to producing energy – mainly electricity but also hydrogen and other synthetic fuels – with renewable energy technologies. The offshore oil and gas sector must move to offshore wind. Therefore, developing new utility-scale on- and offshore wind farms and solar farms becomes the new business focus.

The Utility sector will have to evolve to a renewable electricity and hydrogen distributor and energy services provider. These two functions are key to decarbonising the energy sector and enabling other industries to switch to renewable energy.

‘The transition from offshore engineering for oil and gas extraction to wind power is a huge new business field for the established energy sector,’ says Dr Sven Teske, Research Director and project leader from ISF. ‘To decarbonise transport, cars will not drive with oil but with electricity, leading more demand for renewable electricity – that’s good news for power utilities.’

Other recommendations include an increased use of electricity by both the Transport sector, which must increase the production and use of electric vehicles, and the Steel sector, which must pivot to electricity-based manufacturing processes.

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