In line with the Paris Agreement on climate change, 2025 marks a key milestone in the pursuit of net zero, as many companies that have stated net-zero ambitions approach the first checkpoint for their emission reduction targets.
As additional data becomes available to capture the adoption of low-carbon technologies, investors that focus on this area have had to evolve their assessment methods. This evolution is necessary for them to better understand companies’ progress in aligning with a net-zero scenario. Despite these changes, one constant has remained: There is no singular data point that can capture the nuance of how companies across sectors are approaching their net-zero goals.
In our view, a holistic approach is needed to assess companies’ alignment to a net-zero pathway, combining quantitative data with qualitative fundamental analyst research to capture real-time insights. Over the past three years, Neuberger has continued to innovate our process of measuring company alignment with a net-zero scenario, especially through our proprietary Net-Zero Alignment Indicator (the Indicator). Extending our dataset, advancing our methodology and building sector-specific factors has allowed us to further capture the intricacies of assessing net-zero alignment accurately and realistically.
In this paper, we assess the current state of companies’ progress along their chosen net-zero pathway through the lens of the Indicator, share our “lessons learned” from integrating the Indicator into our investment process for clients that have set a net-zero target, and explain how we have sought to continuously improve the Indicator to better help investors assess their progress toward a net-zero objective.
Executive Summary
- By incorporating real-time analyst insights into a company’s alignment assessment, the Neuberger Berman Net-Zero Indicator is able to bridge the information gap where quantitative data may lag.
- Our in-depth assessments across a broad range of companies have allowed us to use the Indicator to track global decarbonization efforts, which are now at a critical juncture.
- The proliferation of off-the-shelf net-zero alignment products creates issues around methodology, timeliness and coverage.
- Our tool overcomes these issues through the use of multiple data sources, annual methodology reviews and, importantly, a qualitative overlay from our analysts.
- Continued innovation will remain essential to our effort on behalf of clients.