Sustainable finance
Portfolio Decarbonization
Definition
Portfolio decarbonization is the deliberate reduction of the greenhouse gas emissions associated with an investment portfolio — measured as financed emissions or weighted average carbon intensity — toward a target consistent with a net zero pathway. It can be achieved by engaging with investee companies to cut real-world emissions, tilting toward lower-carbon holdings, or divesting high emitters, with materially different real-economy effects.
References
Overview
How it is used
Asset owners and managers set interim portfolio targets (e. g. , emissions intensity reductions by 2030), use them in mandate design and report progress under frameworks such as the Net Zero Asset Owner Alliance and PCAF-based accounting.
Why it matters
Portfolio decarbonization metrics are the main way financial markets claim climate progress; understanding what drives the numbers is essential to telling real transition from paper decarbonization.