Investor group bans carbon removal from CO2 reduction plans

People walk near The Shard building, owned by the State of Qatar, in London
People walk near The Shard building, owned by the State of Qatar, in London, Britain, November 26, 2022. REUTERS/Henry Nicholls - RC2NTX98YR7I

LONDON, Jan 31 (Reuters) - An investor group committed to climate change and controlling $11 trillion in assets has banned members from counting carbon removal schemes towards their emissions reduction targets before 2030, amid increasing scrutiny of the fast-growing market for carbon offsets.

The Net Zero Asset Owner Alliance (NZAOA) said on Tuesday it wanted its members to focus in the first instance on encouraging investee companies to reduce emissions across all sectors, rather than removing carbon that has already been emitted by, for example, planting large numbers of trees.

The move reflects broad concerns about the quality of some carbon removal schemes and criticism of companies that buy carbon credits instead of improving their own carbon footprints, however the United Nations has said that carbon removal will be required to slow or stop climate change by 2050.

The new policy applies to NZAOA members and the companies in which they invest, after a previous version prohibiting carbon offsets generated questions from members.

For the longer term, the NZAOA still wants members to invest in and support the development of a liquid and fully accountable market for carbon removal certificates.

"Investments in high quality carbon removals will encourage demand and the development of the market," said Jessica Andrews, UNEP FI investment lead and senior project manager for NZAOA.

"However ... we expect members to prioritise real world abatement (decarbonisation) at least until 2030."

Not all investors back the prescriptive approach.

Maria Nazarova-Doyle, head of pensions investments and responsible investments at Scottish Widows, said that while offsets were not a substitute for climate action, she could see benefits of taking early action to direct capital to conservation and nature projects, especially as oversight of such projects improves.

"If its about protecting forests, it may be that you get to 2040/2050 and there’s no forest to protect anymore."

(This story has been corrected to remove reference that the initiative runs counter to U.N. message in paragraph 3)

Reporting by Virginia Furness Editing by Mark Potter

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