Open Access

Andreas G. F. Hoepner, Stefan Jacob, Sarah Koch, Marco Wilkens, Jonas Zink

• The climate crisis calls for rapid absolute reductions in greenhouse gas (GHG) emissions, requiring significant capital reallocation. In the financial industry, net-zero investment strategies are mostly guided by relative carbon intensity (CI) metrics rather than absolute GHG emissions. We show that such net-zero oriented investments can be misleading, cause insufficient investor action, and delay meaningful emission reductions. We propose two solutions: first, the rigorous and universal application of an inflation-adjusted CI metric that accounts for changes in a key financial fundamental relative to the portfolio inception year. Second, we propose the addition of absolute GHG emission limits at portfolio inception. These measures will better align net-zero investment strategies with real-world absolute GHG emissions targets and avoid “emission intensity loopholes” as large as the GHG emissions of the Netherlands and Sweden together.