Implementation guidance for objectives and targets

Introducing NZIF’s objectives and targets

This implementation guidance is for asset owners and asset managers drawing on the Net Zero Investment Framework (NZIF). It can be used to support their considerations as they set their individual net zero objectives and targets, including for a net zero investment strategy or to fulfil a net zero commitment. This guidance and any supporting documents are to be read subject to the disclaimer.

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NZIF is the most widely implemented guidance by investors to set targets and produce related net zero strategies and transition plans, including signatories of the Paris Aligned Asset Owners and Net Zero Asset Managers initiatives.

It can offer the foundations for a net zero strategy and transition plan, aiming to support the decarbonisation of portfolios in a way that influences real economy emissions reductions. It can help investors when developing, setting, reviewing and updating individual net zero objectives and targets.

This guidance is an updated version of Supplementary Guidance published in 2021 and will be published in a staggered approach across Q4 2024. The table outlines the key updates to this guidance.

See related links for sections 2-6

What's new?

Key update	Description
Implementation Guidance for Objectives and Targets	The guidance has been reframed as Implementation Guidance for Objectives and Targets, supporting with the monitoring and reporting of net zero targets.
Positioning of objectives and targets	Clear explanation of how net zero objectives and targets are designed to be used together, including a reframing of the Portfolio Decarbonisation Reference Target to a Portfolio Decarbonisation Reference Objective.
Scope 3 clarifications	Recommendations have been made on when and how to integrate scope 3 emissions into net zero targets, varying across the net zero objectives and target types.
AFOLU as a high impact material sector	Agriculture, Forestry and Fishing have been reclassified (NACE section A, Divisions 1 – 3) as high impact material sectors, meaning an increased alignment criteria are recommended to be met to be considered aligned to a net zero pathway.
Attribution analysis and rebaselining	Investors are recommended to perform emissions attribution analysis to enhance their understanding of portfolio emissions changes. Recommendations on rebaselining are also updated.
Climate solutions guidance	Guidance on classifications, metrics and calculation approaches for listed equities and corporate fixed income has been introduced.
Alignment targets: Financed emissions or AUM	The asset alignment target (formerly the portfolio coverage target) can be set using AUM or financed emissions, at an investor’s discretion.
Alignment data mapping	A mapping between NZIF’s alignment criteria and key data sources has been developed, including Climate Action 100+, TPI, SBTi, CDP, Carbon Tracker and Net Zero Standard
New asset classes	Guidance for infrastructure, private equity and private debt have been integrated, whilst sovereign bonds and real estate guidance have seen updates.
Case studies	A collection of investor case studies have been published, covering a wide range of target setting topics.

Overview of the four targets and objectives

Objectives and targets are a feature of any investor net zero strategy or transition plan, helping to set clear direction and ambition.

They act as a means to monitor strategy, communicate climate goals and allow clients and beneficiaries to hold investors to account.

Investors are recommended to set two objectives at the portfolio level and two targets at the asset level. Each has a different role, and investors are recommended to set all four across each asset class in which they invest, consistent with their needs as independent fiduciaries.

The ‘implement or explain’ basis of NZIF allows for flexibility and contextual nuance.

Table: NZIF’s objectives and targets


Target type	Objective	Rationale
Portfolio level
Portfolio Decarbonisation Reference Objective	An emissions reduction objective aligned with a net zero pathway	Sets the required ambition for an investor’s portfolio across the short, medium and longer term, and can set the basis for a net zero strategy. The objective can act as a benchmark/performance monitoring tool.
Allocation to Climate Solutions Objective	An objective to scale up investments in climate solutions	Demonstrates an ambition to scale up investment in activities, goods or services across technologies and sectors required to decarbonise the real economy. It further supports investors aiming to take advantage of opportunities arising from the net zero transition.
Asset level
Asset Alignment Target	A target for increasing the proportion of AUM or financed emissions that is considered aligned with net zero	Captures changes in the net zero alignment of assets over time against indicators or metrics that reflect backward, current and forward looking alignment to net zero pathways. The target facilitates a focus on achieving net zero decarbonisation through real economy emissions reductions.
Engagement Threshold Target	A target for increasing the proportion of financed emissions that are aligned with net zero or under direct or collective engagement and stewardship actions	Aims to ensure investors undertake stewardship and engagement actions with assets that are not transitioning at a pace aligned to a net zero pathway, helping increase the proportion of assets that are aligned with net zero pathways.

How the objectives and targets interact

Each objective and target serves a different purpose and when used together, promote an approach that reduces emissions in the real economy.

Portfolio decarbonisation is positioned as an objective that can set the foundations and ambition of a net zero strategy and provide information on a portfolio’s emissions and effectiveness of investor actions, from a backward looking perspective.
The asset level alignment and engagement targets can guide the net zero strategy on a more granular basis, with different and specific levers of influence across different asset classes, as detailed throughout the alignment and engagement section. Importantly, the asset alignment target has a forward looking perspective, as well as taking backward looking and current ‘snap shots’ in time to inform the net zero strategy at asset level. This allows investors to take a view of the potential and future decarbonisation contribution an asset in a portfolio may have, as well as the past contribution to decarbonisation.
NZIF recommends setting a separate objective to scale up investment in climate solutions. There are elements of climate solutions assessments within the asset level alignment assessment, such as through indicators relating to green revenues, green capex, and low carbon production capacity. However, given the significant gap in financing for the activities, goods, and services required to reduce and remove emissions required in a 1.5°C scenario, a separate objective may direct investor efforts to allocate additional capital and tilt towards climate solutions providers in the short to medium term.

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Implementation guidance for objectives and targets

Introducing NZIF’s objectives and targets

Case studies

Overview of the four targets and objectives

How the objectives and targets interact

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Related links

Section 2: The Portfolio Decarbonisation Reference Objective

Section 3: Portfolio Decarbonisation Reference Objective for sovereign bonds

Section 4: Allocation to Climate Solutions Objective

Section 5: Asset Level Assessment & Targets

Section 6: Listed Equity & Corporate Fixed Income