Moody’s Investors Service has unveiled a groundbreaking framework today—Net Zero Assessments (NZAs) designed to aid investors in evaluating and comparing companies’ decarbonisation plans and actions.
The rationale behind the new product lies in addressing the challenges faced by investors and market participants in gauging and comparing emissions reduction plans across different companies, according to ESG Today.
This stems from the inconsistencies in disclosure requirements, varying magnitudes, coverage, and timing of targets, along with differences in firms’ capacities to implement business transformation plans and meet the stated targets.
The NZAs offer a scoring system, ranging from NZ-1 (highest score) to NZ-5 (lowest score), allowing for a clear assessment of an entity’s decarbonization profile.
This is assessed against a Paris Agreement-consistent pathway towards achieving global net zero by 2050. The scores consider factors such as the strength of an entity’s ambitions, the implementation of its plans, and its governance concerning emissions reductions.
The new framework is applicable not just to financial corporates but extends to non-financial corporates, including public sector and non-profit entities that exhibit revenue-raising capacity akin to business models.
Brian Cahill, Global Head of ESG at Moody’s Investors Service said, “NZAs provide an independent and comparable assessment of an entity’s emissions reduction profile, enabling market participants to better understand the relative positioning of non-financial corporates as they transition to a low-carbon future.”
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