Video: ‘Scope 3 is what makes net-zero commitments real’

Net-zero commitments – regardless of how well developed they are – are “welcome and important, both in terms of the specific commitment from the group, but also in terms of the signal it sends to the market”, says Rory Lonergan, executive director at Australian investment group Clean Energy Finance Corporation.

“We are still in the signalling phase in terms of decarbonisation,” Lonergan tells New Private Markets in this 16-minute video interview. “But hopefully we are rapidly moving into the action phase.”

CEFC is an Australian state-owned investor with a mission to cut emissions by investing in agriculture, cleantech, energy generation and other sectors. It makes direct investments, as well as making commitments to third-party managers.

Lonergan, speaking before some significant net zero-related announcements were made this week at the COP26 summit, describes what he views as the difference between a credible net-zero commitment and a “flimsy” one. First is whether the group in question has put thought into understanding what it means for their organisation, or whether they are simply reacting to pressure from competitors or customers.

Second, is where are they in terms of developing a pathway to achieve their stated objective of net zero by their chosen date: “Have they done the core work; have they done their baseline; do they understand what technologies are available to them to reduce emissions; and are those technologies currently available economically and at scale?” Further, he asks, how much residual carbon will there be and is the organisation willing and able to buy offsets.

Lonergan points to Australia’s “premium, A-grade” property sector as having made good progress on these points. “They have a very clear vision – they have done a baseline, developed their pathway… they can plan their glidepath,” he says.

As more organisations calculate “Scope 3” emissions – those generated across an organisation’s entire supply chain – it will catalyse greater decarbonisation across all industry, says Lonergan. “As regulatory and consumer pressure develops, I think there will be an increasing focus on Scope 3… Scope 3 is what will make all of the net-zero commitments real.”

“Corporates that are close to the end consumer will seek to decarbonise, which pushes pressure back down the supply chain,” Lonergan says.