There are also social implications, given people may need to be displaced to enable such large-scale planting.
Transparency
Lastly, to be credible, long-term pledges must be reflected in short-term targets, capital expenditure, research and development plans, and remuneration. Otherwise, they are worthless.
Active investors have an important role in challenging the alignment of projects to net-zero pledges by asking how targets have been factored into capital investment decision-making.
It is imperative companies show how their net-zero targets are split into actual emission reductions (Scope 1, 2 and 3) versus negative emissions, including the role of voluntary offsetting schemes. And, critically, how their capital expenditure plans are aligned to those targets.
Those invested in companies with empty pledges face stranded-asset, carbon and reputational risks. Taken alongside inadequate country commitment, the biggest risk of empty pledges is the effect on our planet and future generations.
All these pledges create the sense that much more is happening than there actually is, but we cannot limit global warming without credible action plans. And, if we think targets are not credible, we must hold companies to account through active engagement and voting.
Eva Cairns is ESG investment analyst at Aberdeen Standard Investments
