Net Zero by 2050: The Coalition is Growing - SG Analytics

1. ESG Consulting Services WHITEPAPER Net Zero by 2050: The Coalition is Growing Reaching Net Zero by 2050 | SG Analytics

2. Net Zero by 2050: The Coalition is Growing In order to keep global warming to 1.5°C over pre-industrial levels, we must ensure that we do not emit anymore CO2 into the atmosphere than what we eliminate. Take a look at how different countries plan to attain net-zero emissions by 2050. Key Learnings • ‘Net Zero’ is a phrase that resounds across climate action, but experts believe it is critical in keeping us safe from an impending catastrophe. • Net Zero has been accepted by over 190 nations, including the United Kingdom, the United States, Australia, China, and others. • By 2050, the world can achieve net-zero emissions, but will require significant improvements in climate action plans. • Massive reduction in coal, oil, and gas consumption must be made. Governments representing two-thirds of the global economy are determined to achieve net-zero emissions by 2050. Many are implementing new policies and incentives and stepping up regulatory measures to encourage businesses to embrace zero-carbon practices. Government action is critical since favorable regulations may promote and support enterprises’ emission-reduction efforts. What Exactly Does ‘Net Zero’ Imply? What is Net Zero? Measures to lower emissions + Measures to remove emissions = Net Zero (Balance between the amount of greenhouse gas produced and removed from the atmosphere). The term ‘Net Zero’ refers to a situation in which greenhouse gas (GHG) emissions are neutralized through their removal from the atmosphere. When we burn fuel, gasoline, or coal for our homes, industries, or transportation, greenhouse gases such as carbon dioxide (CO2) are emitted. Farming and landfills both create methane. These gases trap the sun’s energy within the atmosphere, causing global warming. Meanwhile, global deforestation reduces the number of trees and plants that absorb CO2. The word ‘Net –Zero’ is significant because, at least for CO2, this is the point at which global warming declines. The Paris Agreement emphasizes the importance of net-zero emissions, urging governments to “achieve the right balance between anthropogenic emissions by origins and reduction of greenhouse gases by sinks in the second half of this century.” The term ‘net’ in Net Zero is important as reducing all emissions to zero within the required timeframe will be highly challenging. We will, undoubtedly, need to increase disposal of greenhouse gases and make a substantial and broad reduction in overall emissions. To be successful, Net Zero must be permanent, which means that any greenhouse gas reduction must not leak back into the environment over time. 2

3. Net Zero by 2050: The Coalition is Growing A New Era of Tackling Climate Change Has Begun... Up – CO2 produced; Down – CO2 reduced = Net Carbon footprint - recreate Carbon Offsets Allow You to Balance Out Your Emissions Net Carbon Footprint The crowd erupted in applause as the 21st United Nations Climate Change Conference concluded with the 2015 Climate Summit in Paris. Climate activists leapt to their feet, eyes welling, congratulating each other, and applauding that poignant moment in history. On December 13, 2015, the emotions in the exhibit were not simply for the cameras. After weeks of arduous high- level discussions in Paris, an agreement had finally been reached. Against all odds, the world community had finally resolved to do whatever it took to keep global warming well below 2°C, preferably 1.5°C, relative to pre- industrial levels, after decades of unsuccessful attempts and failures. The Paris Agreement, a legally binding international pact on climate change agreed at COP21 in 2015, has been adopted by over 190 countries, including the United Kingdom, the United States, Australia, China, and others. By the end of this century, the agreement intends to keep global temperatures under 2°C from pre-industrial levels. Signatories also agreed to “continue efforts” to keep global warming below 1.5°C. Global GHG emissions must be ‘Net Zero’ by the second part of this century to meet the 1.5°C goal. Net Zero may be a slang in the realm of climate change, but experts believe it is critical in keeping us safe from ensuing disasters. According to a United Nations climate science panel, man-made carbon dioxide emissions must drop by about 45% by 2030 from 2010 levels and achieve Net Zero by mid-century to give the world a better possibility of limiting global warming to 1.5°C and avoiding the worst effects of climate change. However, as emissions continue to rise, the world has already warmed by about 1.1°C and is on the way to get heated by at least 3°C in this century. According to scientists, this would result in increasingly severe weather and potentially disastrous sea-level rise, rendering certain regions of the world uninhabitable and fueling famine and migration in several other parts. Because of the escalating public pressure, an increasing number of countries, corporations, and organizations are vowing to reduce their GHG emissions to zero by 2050 or sooner. 3

4. Net Zero by 2050: The Coalition is Growing The Impetus for Achieving Net Zero Where Do Industries Stand on Net Zero? How Many Have Net-zero Targets? 54% 45% 34% 26% 53% 36% 25% 51% 34% 67% 72% 78% Industry Target Year Academia Apparel Food & beverage Energy Financial IT Media & telecommunications NGO Professional services Public sector/government Transportation Utilities 2050 2030 2040–2050 2050 2030 2030 2022–2025 2030 2022–2025 2030 2050 2050 Source: South Pole Consumer demand is pushing businesses to go Net Zero, but government pressure is yet to have a significant impact. Regulations and investor pressure are way down on the list of factors influencing corporations to become Net Zero, suggesting that governments are not doing enough to convert their own national climate goals (NDCs) into laws. Similarly, despite more financial advisers increasing funds and investment for the green economy, the real impact of climate and nature-related financial disclosures may not have yet taken effect, which means financial flows are not yet aligned with a net-zero future. Materials (33%), transportation (72%), utilities (78%), professional services (34%), and consumer durables and apparel (45%) are more likely to commit to net-zero emissions. Most of these sectors have historically large operations and fierce competition. These businesses can differentiate themselves and set the benchmark by listening to their consumers and taking the lead on climate change. Risk management, which includes future-proofing operations against expected disruptions and managing reputational risk, is the highest-ranking driver among risk-averse sectors, where even a slight delay might result in disastrous economic results in a short period. The long-term prognosis of company operations, such as creating more granular supply chain monitoring and recruiting new talent, may not be a significant reason for organizations to target Net Zero today and may lack instant value-addition in the form of profits or improved reputation. Media and telecommunications (25%) and information technology (36%) are the only industries with a higher-than-average personnel acquisition and retention ranking as a net negative driver. 4

5. Net Zero by 2050: The Coalition is Growing The Biggest Greenhouse Gas Emitters What Have Different Countries Promised for Net Zero? Countries China United States India Russia Japan Iran Germany South Korea Saudi Arabia Indonesia Total CO2 in MT 11680.42 4535.30 2411.73 1674.23 1061.77 690.24 636.88 621.47 588.81 568.27 Countries Bhutan Germany Sweden Brazil Canada European Union France Japan Mexico South Korea South Africa US UK China India Target Year Achieved 2045 2045 2050 2050 2050 2050 2050 2050 2050 2050 2050 2050 2060 2070 Source: World Population Review For the past 70 years, carbon dioxide emissions have been significantly increasing. In the future decades, such emissions are expected to stay stable but at a relatively high level. The emission rise in emerging nations is predicted to be offset by an emission decrease in established economies. A handful of countries account for the most global GHG emissions: China, the United States, and India are the three biggest emitters. Over two-thirds of worldwide GHG emissions are accounted for by the top 10 emitters. Without meaningful action from these top 10 emitters, the world will fail to combat climate change. China is the world’s top CO2 emitter, with 11680 MT (11.680 GT) of CO2 emissions expected in 2020. This is just over 32% of global emissions in 2020. With 4535 MT (4.535 GT) of carbon emissions, the United States is second, accounting for around 12.6% of total world emissions. Risk management, which includes future-proofing operations against expected disruptions and managing reputational risk, is the highest-ranking driver among risk-averse sectors, where even a slight delay might result in disastrous economic results in a short period. The long-term prognosis of company operations, such as creating more granular supply chain monitoring and recruiting new talent, may not be a significant reason for organizations to target Net Zero today and may lack instant value-addition in the form of profits or improved reputation. Media and telecommunications (25%) and information technology (36%) are the only industries with a higher-than-average personnel acquisition and retention ranking as a net negative driver. Source: World Population Review To avoid disastrous global warming, humanity must simply stop releasing more greenhouse gases into the atmosphere as compared to what is removed. Many nations are turning this into a national strategy, laying out plans for a carbon-free future. Is it sufficient? Not precisely. However, it is quickly becoming the international standard for leadership. Over a hundred countries have pledged to work together to achieve net-zero emissions by 2050. Here’s what some of the countries are promising: 5

6. Net Zero by 2050: The Coalition is Growing Target – 2060 In September 2020, President Xi Jinping stated to the United Nations General Assembly, that China will try to achieve carbon neutrality by 2060. He said that the government will pursue "more aggressive policies and actions" to reach a peak in emissions before 2030. Many provinces continue to develop new coal power plants to support economic development, despite Beijing prioritizing renewable energy to recover from the COVID-19 outbreak. China Target – 2050 In an April 2021 UN proposal, the United States stated that it will decrease emissions by 50–52% by 2030, compared to 2005 levels, and reach net-zero emissions by 2050. Joe Biden promised a $2 trillion “clean energy revolution” and 100% clean electricity by 2035 when he was elected President of the United States in November 2020. However, the Republican and Conservative Democratic opposition forced him to significantly reduce environmental expenditure in a $1.2 trillion bipartisan package. United States Target – 2070 After declining to define targets for net-zero carbon emissions, India’s Prime Minister Narendra Modi took to the stage at the United Nations Climate Change Conference in Glasgow, Scotland and stated that the country would be Net Zero by 2070. Modi’s plan puts India, the world’s third-largest yearly carbon emitter, on course to reach net-zero carbon emissions a decade after China, the world’s largest carbon emitter. India Target – 2050 In May 2021, Japan made its 2050 net-zero target a law. Japan is the fifth-largest emitter globally, and coal accounts for one-third of its electrical output. The net-zero goal necessitates significant investment in renewables and a thorough revamp of the country’s current climate strategy, which is primarily reliant on coal. Japan Target – 2045 After boosting its climate ambition following a significant court ruling, Germany incorporated its 2045 net-zero aim into law in June 2021. The cabinet decided to cut emissions by 65% by 2030, 85–90% by 2040, and reach Net Zero by 2045, compared to 1990 levels. Analysts believe Germany must phase out coal by 2030, accelerate the transition to electric mobility, and raise the carbon price on transportation and heating fuel to meet targets. Germany Target – 2050 In October 2020, South Korean President Moon Jae-in publicly committed to a 2050 net-zero objective, turning an election goal into a policy pledge, which was later validated in a United Nations submission. When his Democratic Party won a landslide victory in April 2020, Moon announced that he would pursue a Green New Deal manifesto pledge to decarbonize the economy by 2050 and eliminate coal subsidies. This is a significant problem as the country is the seventh-largest CO2 emitter in the world. South Korea relies on coal for nearly 40% of its power and has been a significant investor in international coal projects. South Korea 6

7. Net Zero by 2050: The Coalition is Growing Legally Binding Net-zero Targets- The Road to Net Zero Countries with laws, policy documents or concrete timed pledge for carbon neutrality by target year Guyana Suriname 2070 2060 2053 2050 2045 2040 2035 2030 Achieved Guinea- Bissau Cambodia Bhutan Liberia Benin Gabon Madagascar Source: Energy & Climate Intelligence Unit Only Japan, Canada, and the EU have legally enforceable net-zero commitments among the top 10 GHG emitters. In December 2000, EU member states agreed to a binding target of a net domestic reduction in GHG emissions of at least 55% by 2030, compared to 1990 levels. The EU has set forth a long-term plan to achieve carbon neutrality by 2050. Sweden and Germany have established legally enforceable net-zero objectives for the year 2045. France, Denmark, Spain, Hungary, and Luxembourg have all chosen 2050 as their deadline. Japan, Korea, Canada, and New Zealand have approved legislation pledging to net-zero emissions by 2050, while Ireland, Chile, and Fiji are considering such legislation. If any of the abovementioned governments fail to fulfill these standards, it is unclear how the legal, obligatory nature of the targets will be enforced. However, such marks can help governments become more proactive and concentrate on long-term goals. The Urgent Need for Sustainable Innovations Even if all this is accomplished, there is still one more challenge: innovation. According to research, reaching Net Zero by 2050 will be impossible without a significant acceleration in renewable energy innovation. Indeed, current technologies will achieve almost all the emission reductions required by 2030 to keep the world on pace to meet the net-zero 2050 target. However, reaching net-zero carbon would need extensive acceptance of technology currently in development. Nearly half of CO2 emission reductions in 2050 will have to come from technologies that are now in the prototype or at the demonstration stage. Significant innovation will be required in the coming decade to have these technologies ready, such as carbon capture, use, and storage in cement manufacturing or ammonia fuels for transportation. 7

8. Net Zero by 2050: The Coalition is Growing About the Author Vineet Agarwal • Partner Partner at SG Analytics, Vineet is an ESG advocate, evangelist, and thought- leader; he is a passionate and empathetic professional with over two decades of experience in setting up & growing multiple insights & analytics businesses. Vineet is resolved to democratize sustainability with the goal to make ESG data, insights, and services available for global asset managers and businesses. He is a voracious reader, a sportsperson at heart, an ardent fan of product improvisations and innovation, and the seamless implementation of practical ESG principles across all business aspects. Vineet is also an angel investor in a few companies (including clean-tech and sustainability- focused companies) which are at different maturity stages. Disclaimer This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by SG Analytics (SGA) and is not intended to represent or get commercially benefited from it or imply the existence of an association between SGA and the lawful owners of such trademarks. Information regarding third-party products, services, and organizations was obtained from publicly available sources, and SGA cannot confirm the accuracy or reliability of such sources or information. Its inclusion does not imply an endorsement by or of any third party. Copyright © 2022 SG Analytics Pvt. Ltd. www.sganalytics.com GET IN TOUCH New York | Seattle | San Francisco | Austin | London | Zurich | Pune | Hyderabad | Bengaluru 8