Net-Zero by 2050

Investor Risks and Opportunities in the Context of
Deep Carbonization of Electricity Generation

A new report details the urgency of global decarbonization and the risks and opportunities for electric utilities and their investors while outlining the governance transformations needed for companies to achieve the net-zero target.

The UN Intergovernmental Panel on Climate Change (IPCC) concluded in October 2018 that we must achieve net-zero carbon emissions economy-wide by 2050 to have at least a 50% chance of limiting warming to 1.5˚C above pre-industrial levels. Its landmark report, Global Warming of 1.5˚C, shows that decarbonizing electricity is essential to limiting warming to 1.5˚C-2˚C.

Today, the electric power sector is one of the largest sources of U.S. carbon emissions, and that, instead of decreasing, U.S. power sector emissions increased in 2018. The failure of electric utilities to achieve net-zero carbon emissions by 2050 at the latest would pose material risks for both long-term investors and society at large. At the same time, carbon-free electrification of transportation and other sectors presents electric utilities with once-in-a-generation growth opportunities.

Net-Zero by 2050: Investor Risks and Opportunities in the context of Deep Decarbonization of Electricity Generation analyzes the twenty largest U.S. publicly traded electric power generators, which combined produce nearly 50 percent of the U.S. electric power sector’s CO2 emissions. Of the twenty, only one (Xcel Energy) has committed to a net-zero target. Seven have set long-term targets that are not yet in line with the net-zero objective, and the remaining twelve have not set any long-term targets at all. None of the companies can yet demonstrate that their capital expenditures are in line with achieving a net-zero target, and many have invested heavily in policy-related activities that oppose climate mitigation efforts.

The report recommends that electric utilities commit this year to net-zero carbon emissions by 2050 at the latest, and adopt four critical boardroom reforms to ensure that their investments, executive compensation, and policy influence are aligned to that target. Given the material risks to investors, the urgency of action, and the complexity of the electricity decarbonization transition required, the report presents a case for holding utility boards of directors accountable if they fail to adopt these reforms.