On March 10th 2021, the Paris Aligned Investment Initiative (PAII) – a coalition working on frameworks for investors to align on the objectives of the climate agreement (1) – published its Net-Zero Investment Framework (2). In a context of multiple “net-zero” pledges from financial institutions, this framework defines objectives and criteria for investors to follow. If the framework sets truly Paris-Aligned goals, it misses the mark by forgetting that phasing-out fossil fuel is an imperative to limit global warming.

A commitment based on realistic 1.5°C scenarios

The PAII proposes to use only pathways (3) with a “high probability of achieving the 1.5°C goal”. Concretely, the framework requires financial institutions to opt for low/no overshoot 1.5°C pathways, with a precautionary approach to NETs. These pathways should be further defined, notably to set maximum levels of negative emissions and include a fossil phase-out trajectory. However, they set an ambition that is truly compatible with the objectives of the Paris Agreement. For example, current scenarios from the International Energy Agency (IEA) and the Network For Greening the Financial System (NGFS) should not be accepted under this framework.

The pathway selection criteria of PAII’s the net-zero framework are much more realistic than the ones used by the Net Zero Asset Owner Alliance (NZAOA). The Alliance allows its members to gamble on large amounts of NETs (notably by using IPCC pathway 3 instead of pathway 1 or 2 scenarios).

Fossil fuels forgotten

While phasing out fossil fuel production is an imperative to have a chance to limit global warming to 1.5°C, the net-zero framework is very weak when it comes to scaling down fossil fuel production (4). In fact, the framework only recommends that investors “use active and escalating engagement with the aim of ensuring no new thermal coal generation is developed and no further tar sand resources are exploited, and also that phase out of existing unabated capacity and activity is undertaken in line with net zero pathways”.

By limiting itself to these few recommendations, the framework leaves out giant loopholes for investors to support fossil fuel despite taking net-zero pledges. To be fully coherent, the framework should:

  • Recommend divestment from companies that plan any new fossil fuel project: The framework does not even define new coal or unconventional fossil fuel projects as a red line. New investment to coal and tar sands developers should be immediately put on hold and the guideline should be broadened to companies planning the development of any project facilitating the opening of new fossil fuel reserves.
  • Target the whole coal value chain and all unconventional fossil fuels: The framework leaves out coal mining and coal-related infrastructures. Tar sands is only one type of unconventional fossil fuels and the framework should be broadened to include shale oil and gas, ultradeep water and drilling in the Arctic (based on the AMAP definition).
  • Ask for Paris-Aligned phase-out dates for each fossil fuel: The framework does not ask investors to set fossil fuel phase-out dates for any fossil fuel. It should notably ask them to exit coal at the latest by 2030 in the EU/OECD and 2040 worldwide, and oil and gas ten years later with intermediate dates for unconventional fossil fuels. Despite failing to require its members to end support to coal development, the NZAOA already asks its members to follow this coal phase-out calendar.

Inadequate target setting and implementation

When setting targets and defining implementation metrics and conditions, the PAII net-zero framework is close to the NZAOA protocol. Both frameworks:

  • Allow targets to be set on carbon intensity only– and not absolute emissions.
  • Prioritize engagement without linking it to a clear escalation strategy: This is a major issue as the target set by PAII for financed emissions to align with a net-zero pathway allows investors to count companies that have been the subject of engagement, even if it does not bear any result. In fact, investors could reach PAII’s engagement goals by merely reaching out to companies or becoming members of collective engagement groups – like Climate Action 100+. PAII’s preference for engagement also pushes it to recommend the use of the least ambitious of the two European benchmarks for index funds (5), while even using the most ambitious EU benchmark would be unsufficient to align with the Paris-Agreement.
  • Do not push their members to act against companies that engage in anti-climate lobbying: Investors should ensure that their investee companies or the lobby groups they are sitting in do not lobby to weaken the climate legislation. They should pledge to divest from companies that do and exit any group involved, after a one-year engagement period (6).

Much like the NZAOA’s target setting protocol, PAII’s net-zero framework fails to provide a realistic and ambitious net-zero frame for investors. If the framework aims at the right objective – limiting global warming to 1.5°C – its fossil fuel blindness and faith in engagement without clear consequences risk sending it off-track.


  1. Started by IIGCC in 2019, the PAII is now led by four regional investor networks – AIGCC (Asia), Ceres (North America), IIGCC (Europe) and IGCC (Australasia). It gathers 110 investors representing $33 trillion in assets.
  2. Reacting to the series of net-zero pledges adopted in 2020 and 2021, and like other climate-focused financial initiatives, the PAII developed a net-zero framework to set clear requirements for investors to get on the carbon neutrality train. The final version of the framework was published on March 10th 2021, after reviewing 90 feedbacks – including Reclaim Finance’s response – to a specific consultation. 35 investors, managing $8.5tn in assets, already committed to apply it.
  3. When looking at a “net-zero” framework, one should always start by looking at the climate scenario or “pathway” used. As the PAII explains “pathway information will be used by investors to determine their own portfolio level targets regarding emissions reductions and investments, to assess the alignment of underlying assets with a net zero pathway, and to ensure methodology providers who offer these services are using an appropriate basis for their analysis”.
  4. It is worth noting that several dispositions of the framework should drive investors to adopt strong fossil fuel requirements. The PAII recommends the adoption of an objective to reduce exposure to fossil fuel reserves, suggest divestment can be based on “inconsistency of company activity with credible net-zero pathways” and require them to “provide differentiated pathway information for regions and sectors which may require net zero emissions earlier or later”.
  5. PAII recommends the use of the “Climate Transition Benchmark” (CTB) that do not exclude the most polluting activities. This recommendation ignores the fact that a global net-zero alignment, that would give us a chance to limit global warming to 1.5°C, requires the reduction of support to the most polluting activities that impair the transition.
  6. For information on anti-climate lobbying, see the Climate Action 100+ benchmark report and Reclaim Finance’s report on a significantly harmful taxonomy.