In late September, the “UN-Convened Net-Zero Asset Owner Alliance” (AOA) released one of its main contributions in the run-up to the “finance COP” in Glasgow. Disappointingly, rather than discussing long-overdue steps to restricting investments in the supply and use of fossil fuels, the “The Net in Net Zeropaper calls on asset owners to “immediately scale investment” into offsets and “negative emissions technologies” – music to the ears of the fossil fuel industry.

While the IPCC’s most recent assessment report shows that in the long term the world will need to go carbon negative to avoid the most disastrous climate impacts, the IPCC and others also show that staying under 1.5° requires deep and rapid cuts in emissions starting immediately, with global emissions being cut in half by 2030 – essentially in eight years’ time.

“The Net in Net Zero” rightly states that “the primary focus” of actions to align with 1.5°C “must remain on deep decarbonization in energy, urban, infrastructure and industrial systems, as well as reversing emissions growth from land use systems.”

This paper underlines a general trend in the world of the net-zero alliances where too much attention is paid to the “net” and not enough to the zero. By adding to this imbalance, the AOA is undermining its own message of the primacy of deep emission reductions and instead encourages its members and the companies they own to continue avoiding meaningful action on their pollution.

What is the Net-Zero Asset Owner’s Alliance? 

  • The AOA was launched in September 2019 by group of mostly European insurers and pension funds and has grown to 48 members – amongst them Axa, Aviva and CalPERS – with assets totaling over $7 trillion.  
  • Its secretariat is provided by the UN Environment Programme’s Financial Initiative.  
  • The members of the AOA are supposed to “commit to transitioning [their] investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels, taking into account the best available scientific knowledge including the findings of the IPCC, and regularly reporting on progress, including establishing intermediate targets every five years.” 

Telling oil and gas companies what they want to hear 

Of course, the oil and gas sector needs little encouragement to focus on “reducing” its emissions through offsets of dubious integrity rather than actually cutting down on the volume of the highly polluting products it sells. Shell, for example, already plans to offset 120 million tons of CO2 from its activities by planting forests equivalent to three times the size of the Netherlands (1).

But Shell has released no information on where these forests will be planted, who is currently using this land, what will happen if the trees die or grow more slowly than predicted because of drought, or are cut down by local people who previously had access to the land for grazing or other uses, or go up in flames as has happened repeatedly to “offset forests” across the US West in recent years (including one in Washington state that supplies offsets to BP) (2).

Offset projects that aim to protect existing forests are also plagued with problems. A recent study of California’s forest offsets program found that around a third of the 100 million credits they assessed were likely fake – a result of systematic underestimates of the quantity of carbon already contained in the forests that were supposed to receive new protections (3).

It is worth noting that the press release accompanying “The Net in Net Zero” is headlined “NZAOA backs call to scale-up carbon removal from the atmosphere” and begins by calling for asset owners to go big on investments in offsets and negative emissions. Not surprisingly this is the message that the media focused on in their coverage of the report – and not the need for asset owners to ensure deep emission reductions (4).

Offsetting’s problems are not a governance problem 

The AOA report endorses the Task Force on Scaling Voluntary Carbon Markets (TSVCM), launched by UN Special Envoy for Climate Action and Finance, Mark Carney, and chaired by Bill Winters, CEO of Standard Chartered. The TSVCM is a prime example of the technocratic wishful thinking that has long dominated among promoters of carbon offsetting markets: it recognizes that offsetting in the past has been rife with cheating, perverse incentives and flawed methodologies, but claims that with the proper governance system all will somehow be well.

Yet the largest global offsetting scheme created so far, the Kyoto Protocol’s Clean Development Mechanism (CDM), was, on paper at least, tightly regulated by a UN-appointed board and secretariat, with the help of a host of supposedly independent consultants. In reality, it is widely regarded as a farce that generated 1.6 billion tons of offsets from projects such as the destruction of industrial gases and hydropower dams in China, many of which — 85% according to one expert analysis — would have happened regardless of receiving income from the CDM (5).

In other words, the net effect of the CDM was to increase CO2 emissions by up to 1.36 billion tons (85% of 1.6 billion offsets) because polluters were able to comply with their Kyoto Protocol obligations by buying fake CDM credits instead of cutting their emissions. Any offsetting scheme promoted by the TSVCM and the AOA is only going to replicate the problems of the CDM, given that it will have the same inherent flaws and perverse incentives.

In January 2021, the NZAOA issued a statement that highlighted the importance of the IEA’s forthcoming net zero scenario and called on it to “take a clear-eyed view of the risks of stranding of high-carbon infrastructure and reserves as well as the implications for oil and gas developments – specifically including the need for managed phase-down of production and use, in parallel with actions to support a just transition” (6). A few months later, in May 2021, in its “Net Zero by 2050” report, the International Energy Agency (IEA) made clear that there is no room for any new investments in fossil fuel supply in a 1.5° carbon budget. The AOA lobbied for the IEA Net Zero report – and should now act on its findings : rather than promoting huge private sector investments into offsetting and negative emissions, it should focus its time and resources on getting its members to push the companies they own to stop investing in new oil and gas projects. To cut carbon, we really do need to cut carbon.


  1. Shell’s net zero climate plans need land up to three times the size of the Netherlands for carbon offsets,” ActionAid, 17 May 2021.
  2. If forests go up in smoke, so can carbon offsets,” Justine Calma, The Verge, 13 September 2019; “Up in smoke – California fires once again highlight dangers of forest offsets,” Gilles Dufrasne, Carbon Market Watch, 22 October 2020;  “Western Wildfires Are Sending Carbon Offsets Up in Smoke,” Dhana Noor, Gizmodo, 27 July 2021.
  3. Systematic over-crediting of forest offsets,” Grayson Badgley et al. (carbon)plan, 29 April 2021.
  4. Investors Managing $6.6 Trillion Call for Funding Carbon Removal,” John Ainger, Bloomberg, September 22, 2021.
  5. Bad Deal for the Planet: Why Carbon Offsets Aren’t Working,” International Rivers, 21 May, 2008; “How additional is the Clean Development Mechanism,” M. Cames et al., Öko Institut, March 2016.
  6. Statement on the Need for a Fully Developed IEA 1.5°C Scenario,” NZAOA, 7 January 2021.