The Net-Zero Asset Owner Alliance (AOA) has revised its Target Setting Protocol. This update increases the ambition of the AOA’s 2025 targets and sets 2030 targets for the first time. It recognizes the key conclusion from the International Energy Agency (IEA) that there is no room for new fossil fuel supply investments in a 1.5°C world, although it fails to require its members to act on this finding. The AOA is the most ambitious of the seven finance sector alliances grouped together under the umbrella of the Glasgow Financial Alliance for Net Zero (GFANZ). But much more remains to be done if the AOA is going to meet its targets and become the “gold standard for GFANZ, particularly in relation to fossil fuels, emissions metrics and measures to tackle Scope 3 emissions.

The AOA’s “Inaugural Target Setting Protocolwas published in January 2021 and explained how the Alliance’s members should establish 2025 targets for their investees’ emissions, for financing the energy transition, for their engagement with investees, and on policy advocacy. The updated version, published on January 25th 2022, takes a similar approach, and like the previous version sets methodologies for two different types of emission targets: “sub-portfolio” targets across asset classes such as listed equity and corporate bonds; and sectoral targets for specific carbon-intensive sectors.

Increased ambition, but inadequate steps to meet the ambition 

The updated version of the Protocol increases the ambition of the sub-portfolio targets for 2025 and adds 2030 targets (1). The original Protocol recommended cuts in financed emissions of 16-29% between 2020 and 2025; the updated version increases this to 22-32%. The new 2030 targets are set at cuts of “49-65% or beyond.” These targets are broadly in line with the IPCC’s findings that staying under 1.5°C requires halving global emissions by 2030 (2).

Unfortunately, the criteria which the AOA sets in the new Protocol are still too weak to ensure that these targets will be met in the real world.

  • The AOA encourages its members to report on the absolute emissions from their investees, and their Scope 3 emissions — but continues to fail to require targets to be based on these metrics. Instead, it allows targets to be set only on investees’ Scope 1 and 2 emissions, and on emissions intensity metrics.
  • The language in the new Protocol on its members’ engagement with investees and asset managers is improved from the earlier version, but is still based on what members “should” do, rather than the stronger “shall.”

In September 2021 the AOA published a paper stating that offsets should not be used to meet sub-portfolio interim targets. However, this “Net in Net Zero” paper sends a mixed message on the acceptability of offsets, in particular through advocating for the scaling up of global offset markets. The updated Protocol continues this confusion by referring to the earlier position but weakening it with a loophole by stating that “purchase of carbon credits by asset owners or investee companies shall not count towards the target achievement, except for qualified removals(emphasis added) (3).

A missed opportunity to grasp the “no expansion” nettle 

The new Protocol refers in several places to the key conclusion in the IEA’s net zero by 2050 roadmap that there is no room in a 1.5°C-aligned world for new investments in fossil fuel supply. For the first time within GFANZ, this updated Protocol recommends that its members act on the conclusion and stop financing fossil expansion. But regrettably the recommendations apply to methodologies that will likely have only a tangential impact on the AOA members’ financing activities.

AOA members can choose to set targets for high-emitting sectors in addition to or instead of sub-portfolio targets (4). The new Protocol says that targets for the oil and gas, and utility sectors should “withdraw financing from new coal-related assets and new oil and gas fields and . . . refrain from investing in, or providing finance to, assets that support the expansion of coal, oil, or gas production and to scale down production” (5). While it is positive to see this language in the Protocol, the AOA does not require its members to set sectoral targets, and few have chosen to do so. Out of the first 29 AOA members to have published their 2025 targets, only four have set sectoral targets (6).

The updated Protocol establishes a new methodology for setting targets for direct investments in infrastructure as one of the “sub-portfolio” asset classes (7). Infrastructure targets should “support the phase-out of fossil fuels required by 1.5°C scenarios.” The methodology calls on members to exclude financing new coal projects and new “upstream greenfield” oil projects “beyond those already committed by the end of 2021” (8). Unfortunately, these recommendations are unlikely to impact the great majority of new fossil fuel projects as these are financed by the companies that develop them, not directly by outside investors.

The AOA was the first of the net zero alliances, and the most ambitious in terms of its targets and recommendations. It is the only alliance to have yet produced a detailed guide to target setting. It is therefore disappointing that the AOA has missed the opportunity of using this updated Protocol to set requirements for its members that are robust enough to likely achieve its ambitious targets. With now less than eight years left to halve global emissions there is no more time for putting off tough choices on meaningful actions that will finally reverse the expansion of the fossil fuel industry.


  1. Of the seven alliances and initiatives that are under the umbrella of the Glasgow Financial Alliance for Net Zero, the AOA is the only one that requires targets before 2030, and the only one for which members have already set targets.
  2. Membership of the GFANZ member alliances requires committing to the criteria of the UN’s Race to Zero Campaign. This in turn requires a commitment to meeting the global goal of a 50% cut in emissions by 2030. The AOA, however, is the only alliance that is currently calling for its members to set 2030 targets which would clearly align with this 50×30 goal.
  3. “Target Setting Protocol: Second Edition,” AOA, January 2022, p.36. This “qualified removalsterm adds both a loophole and more confusion. The term does not appear inThe Net in Net Zero” nor elsewhere in the Protocol. It may refer to the numerous forms of removals mentioned in “The Net in Net Zero” including by forests, soils, wetlands and mechanical methods such as Direct Air Capture. In this case, experience with the history of land-use offsetting suggests this could be a large loophole which would reduce pressure on polluters to cut their emissions by enabling them to buy large amounts of cheap offsets that will represent often bogus and at best often only short-term removals. Land-use offsets can also threaten the land rights and even survival of local and Indigenous communities.
  4. The updated protocol adds methodologies for seven new sectors including cement; agriculture, forest and fisheries; and chemicals.
  5. “Target Setting Protocol: Second Edition,” p.60.
  6. “Credible Ambition: Immediate Action: The first progress report of the UN-Convened Asset Owner Alliance,” October 2021.
  7. The asset classes for which the AOA set methodologies in the first version of the Protocol are listed equity, corporate equity and real estate. The updated Protocol elaborates on its previous real estate methodology. The infrastructure assets included in the new methodology includes fossil fuel-related infrastructure such as power plants, pipelines, and coal trains.
  8. The new Protocol’s position on financing gas expansion is weaker than for coal or oil. It states that: “For gas, members shall not invest in assets which are not aligned with science-based or government-issued regional/national 1.5°C pathways. Further guidance will be given in a forthcoming position paper on oil & gas” (p.53). The reference to “government-issued” national pathways is problematic as many governments’ Nationally Determined Contributions are not Paris-aligned. The AOA published a position paper in 2020 calling for an immediate cancellation of all new coal projects – but allowing continued financing for coal plants and mines that are under construction or being expanded. The updated Protocol fails to close this loophole. According to the think tank E3G, there were 185 GW of plants under construction in mid-2021, a number 65% greater than the capacity of all the coal plants operating in the EU in 2020.

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