Net zero

Our commitment to a net zero future

Green Investment Group’s (GIG) mission is to accelerate the transition to net zero. Since our inception in 2012, we have committed and arranged finance into green projects and operated within a corporate governance framework which requires our investments to positively contribute to specific green objectives.

While our projects are designed to accelerate the transition to net zero, we recognise they produce greenhouse gas emissions resulting from equipment manufacturing, construction, operations and decommissioning activities. Therefore, building on our existing governance framework, in May 2021, we committed to an additional series of net-zero aligned actions.

In April 2022, GIG went on to join Macquarie Asset Management (MAM). As part of MAM, we have the opportunity to deliver even greater impact by mobilising institutional capital into the energy transition and providing clients with access to a broader range of green investment opportunities.

Importantly, GIG now aligns with MAM’s net zero commitment. GIG will invest and manage our portfolio in line with global net zero emissions by 2040 or sooner.

While some legacy investments will continue to access balance sheet capital, we now primarily invest through MAM-managed funds on behalf of our clients. To reflect this new fiduciary asset management role, we have refreshed our net zero strategy to align with MAM’s net zero commitment. We will also continue to work with our legacy balance sheet assets to ensure they are on a clearly defined path towards ‘net zero readiness’ but we will no longer set a balance sheet portfolio target. Net zero readiness involves the asset or portfolio company understanding their emissions profile and feasible net zero pathways, allowing the future owner to manage the asset or company in line with their own net zero targets. 

This update follows the publication of our financed greenhouse gas (GHG) emissions through 2021 (GIG Financed Emissions Report, December 2022) and is focussed on our new net zero strategy for 2023 and beyond.

As required by our governance framework, we will continue to report the green impact of our investments, including GHG emissions avoidance. You can find details of our green impact, including information on our assessment methodology in our Progress Report 2022.  

GIG’s net zero objectives

GIG’s net zero strategy has two objectives:

1. to assist portfolio companies within GIG-aligned funds to develop net zero business plans for 2040 or sooner, in line with MAM’s net zero commitment (which can be found in the MAM 2021 Sustainability Report); and
2. to focus our legacy balance sheet investments on net zero readiness for their future owner.

These objectives are consistent with Macquarie Group’s commitment to continue to reduce the emissions of our own business operations by 2025 and to further align our financing activity with the global goal of net zero emissions by 2050.

GIG’s net zero strategy

GIG’s refreshed net zero strategy, and the differences between the funds and balance sheet investment, is summarised in the table below.

Funds

Our approach to net zero is fully aligned with MAM, to invest and manage our portfolio in line with global net zero emissions by 2040. As a member of the Net Zero Asset Managers initiative (NZAM), our assets will be managed in line with the NZAM criteria. This involves managing all portfolio companies where MAM exercises control or significant influence to:

• Develop a third-party verified footprint for scope 1 and scope 2 (operational) GHG emissions
• Undertake a screening assessment of scope 3 (value chain) GHG emissions to inform materiality and potential levels of influence
• Set a science-based target for scope 1 and scope 2 GHG emissions for 2030 (latest) that aligns with net zero by 2040
• Develop a net zero aligned business plan

These steps will be completed for assets in GIG’s new and existing funds within 24 months of acquisition.

Balance sheet

GIG’s balance sheet assets will be managed for net zero readiness, whilst under GIG ownership. The path towards net zero readiness will involve supporting the asset or portfolio company in developing an understanding of their emissions profile and feasible net zero pathways, allowing the future owner to manage the asset or company in line with their own net zero targets.  

GIG will use the same engagement approach as outlined by MAM for fund assets.

Steps to net zero

Pre-investment screening: prior to investment, we will assess the asset’s current position on their net zero pathway. This assessment will be used to establish a company baseline and inform our asset management transition plan. Steps will include:

• Review of net zero commitments and business plans, where available;
• power sector scenario categorisation; and
• estimates of scope 1, 2, 3 emissions.

Net zero asset management: underpinned by engagement with portfolio companies, we will support the progression of the assets through this series of steps towards net zero:

• Measuring financed emissions:
  • Improving quality of the data gathered at pre-investment stage to establish a robust baseline to inform a materiality assessment, including third party validation of improvement points.
• Decarbonisation pathways:
  • Identification of viable decarbonisation pathways and establishment of net zero transition plans.
• Value chain emissions:
  • Engagement to influence the supply chain, in particular recognising the opportunity we have in our investment in and establishment of development platforms.
• Offsets:
  • While our net zero efforts will centre on decarbonisation, we recognise the role of using high quality carbon removal offsets for residual emissions at the asset level.
  • We are actively engaging with experts in Macquarie to establish the optimal solutions for our assets and portfolio companies to offset their residual emissions.

Outlook to 2023 and beyond

In line with our mission, and as the world’s transition to net zero takes shape, we will continue to develop our approach to accelerating that transition. This means investing in new technologies and offering new services that support the energy transition, especially where we can help clients and partners in emissions intensive sectors to decarbonise. GIG’s balance sheet financed emissions will be considered as part of Macquarie Group reporting, along with portfolio-level scenario analysis. Reporting on GIG funds’ financed emissions will be included as part of MAM’s net zero reporting.

Our approach to readying our balance sheet assets (i.e. net zero readiness) and assessing decarbonisation strategies will be reviewed regularly to ensure they remain aligned with the most recent climate science and global policy requirements.