Navigating the Net

Zero Landscape
A primer for businesses on decarbonization
and addressing climate risk

May 2021

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 Drivers for decarbonization and net zero

Global net zero landscape Global economies taking net zero emissions targets

The recent wave of net zero targets has United Kingdom European Union China
brought global emissions trajectories Target date: 2050 Target date: 2050 Target date: 2060
closer to the Paris Agreement’s 1.5°C
goal.

As of December 2020, 127 countries

have either set net zero emissions targets
or declared intentions to do so,
representing cumulatively, around 63% of
global emissions.1

United States
Interim targets and policy revisions Target date: 2050
resulting from net zero pledges will have
wide-reaching impacts, including risks and
South Korea
Target date: 2050
opportunities for businesses, as countries
chart courses towards meeting their net
zero targets.

South Africa
Target date: 2050

National Solar Mission Existing national initiatives which complement decarbonization

Decarbonization drivers for India
Smart Cities Mission
While India has not currently stated India is on track for achieving NDC targets in advance of the 2030 target year.
intentions to adopt a net zero target, National Mission for
India’s climate actions are reflected in Enhanced Energy Efficiency NDC Targets
progress towards NDCs as well as existing
climate-oriented programmes and International Solar Alliance 33-35% below emissions 40% share of non-fossil cumulative
policies. intensity of GDP power generation
SUPRABHA: Sustainable Partnership
for Rooftop Solar Acceleration in India
India’s Union Budget 2021 included a
specific focus on energy transition, Standards & Labeling Program
including the announcement of a National
Hydrogen Mission and budgetary UJALA Program 21%
allocations for RE and clean air programs. 38%
National Electric Mobility Mission Plan
21% reduction in emission 38% non-fossil power
intensity of GDP since 2005 generation capacity achieved
NDC: Nationally Determined Contribution Dedicated Freight Corridors

National Policy of Biofuels NDC Progress

Navigating the Net Zero Landscape

 Key questions for businesses

How do senior What are the

1 executives visualize 2 business impacts
integration of climate of climate change
change in business risks and
planning? opportunities?

Questions to be
answered by
businesses

How can value

chain partnerships How can businesses
be leveraged to develop plans to
4 stimulate innovation, 3 achieve net zero
collaboration and emissions?
investment in
decarbonization?

Navigating the Net Zero Landscape

 Key questions for businesses
Overview of EY’s Decarbonization Architecture

know your footprint

understand current GHG emissions
EY’s decarbonization architecture is
designed to assess senior executive views on
see the future the core components required for a
define emission targets and strategy successful pathway to low/zero carbon to
capture long-term value
execute with purpose 1
implement decarbonization strategy

carbon
footprint meet the enablers
must-haves for success

assess the outcomes

measure monitor manage

reap the rewards

long-term value

Monthly Average Temperature Projections EBIDTA Projections

4.5
4

EBIDTA i(mil USD)

34 3.5
3
32 2.5

2
2
30 1.5
28 1
0.5
26 0
Baseline temp. RCP 2.6 2040-2059 RCP 8.5 2040-2059

2020-21
2021-22
2022-23
2023-24
2024-25
2025-26
2026-27
2027-28
2028-29
2029-30
2030-31
2031-32
2032-33
2033-34
2034-35
2035-36
2036-37
2037-38
2038-39
2039-40
24
22
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Strategy A Strategy B
Global energy related CO2 emissions projections

34.3 40.0 Climate change change risks may impact businesses due to supply
chain disruptions, regulatory carbon pricing, market trends,
GTCO2

9.0 customer preferences towards low-carbon products or other

0.0
means. Long-term projections of climate change effects – physical
2014 2025 2030 2035 2040 2045 2050 2055 2060 and transitional are essential for evaluation of business impacts.
RTS 2DS B2DS

Navigating the Net Zero Landscape

 Key questions for businesses

GHG abatement potential

Essential stepping stones
Energy to a net zero emissions
Efficiency roadmap include
comprehensive value chain
emissions accounting and
Energy greenhouse gas (GHG)
mix
Product
emissions forecasting based 3
mix
changes
changes on custom-built scenarios.
Scenario development
needs to encapsulate
Carbon evolving climate policies,
offsets
technology trends and/or
sector developments.
BAU Scenario 1 Scenario 2
Presentation title

Exploring product diversification opportunities

Technology evaluation
Exploring corporate – Leveraging other industry
start-up partnerships partnerships across value chain
Market sizing
4
Market positioning

Acquisition of startups Supply chain collaborations

Partnerships – vendor relationship or shared-risk reward model Decarbonization of value chains can Industry alliances
not be achieved unilaterally by any one
company. Therefore, partnerships can
Investment – direct venture capital or venture fund Knowledge partnerships
potentially serve as transformative
enablers for decarbonization.

Navigating the Net Zero Landscape

 Overview of our approach

GHG emissions Projections of Analysis of Enabling Building value

accounting baseline emissions decarbonization pathways decarbonization chain partnerships

► Analyzing baseline ► Assessment of ► Evaluating marginal ► Evaluating role of ► Structuring

GHG emissions data business growth plans abatement costs of financing mechanisms partnerships for
Decarbonization across value chain of and expected product short-term and long- and strategic driving value chain
the organization mix changes term decarbonization decarbonization decarbonization and
of operations and ► Evaluate lifecycle GHG ► Developing projections
levers drivers innovation
value chain inventory of products of GHG emissions ► Project technology ► Framework for ► Market assessment for
cost trends and internal carbon pricing alternate low-carbon
► Dashboarding of ► Assessment of targets
maturity levels of products or carbon
emissions with split aligned with Science ► Building consensus for
CCUS, hydrogen, neural products
across emission Based Targets a comprehensive
biofuels and other
sources, geographies, Initiative decarbonization ► Engage with NGOs for
long-term levers
business functions roadmap / net zero nature based solutions
roadmap and and carbon offsetting
implementation plans

Business impact of climate Strategy for

TCFD gap analysis Scenario development TCFD-aligned disclosures
risks and opportunities climate resilience

► Review governance ► Development and ► Recommendations for ► Structuring

► Under each scenario
and climate disclosure definition of climate integrating climate partnerships for
evaluate business /
practices scenarios aligned with risk in enterprise risk driving value chain
financial impacts due to:
TCFD-aligned ► Gap assessment of
IPCC scenarios
► Transition risks -
management
framework
decarbonization and
innovation
climate risk and governance and
disclosures with
► Customize the
scenarios to
climate policies,
► Evaluate strategic and ► Market assessment for
technology and
opportunity respect to TCFD geographies and
sectors relevant the
market trends
operational levers for
mitigating financial
alternate low-carbon
products or carbon
assessment company ► Physical risks in
specific geographies
impact of climate risks neural products

of operation

CCUS: Carbon capture utilization and storage

TCFD: Task Force for Climate-related Financial Disclosures
IPCC: Intergovernmental Panel on Climate Change

Navigating the Net Zero Landscape

 Pathways for decarbonization

Energy Transition Commission (ETC) pathways for net zero economy IEA Sustainable Development pathway: Potential for GHG emissions reduction

Electricity Hydrogen Ammonia

2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070
Synthetic Fuels Bioenergy & Bio-feedstock Fossil Fuel+CCS

GtCO2
10% 7%
4%
4% 2%
2% 3%
3%
13%
15%

72% Hydrogen Bioenergy Other Renewables Electrification Other Fuel Shifts CCUS
67%

Understanding of global decarbonization pathways

We leverage datasets on global decarbonization pathways with country-specific and company-

specific emissions forecasts. Further, we leverage our experience on advising organizations in
hard-to-abate sectors on navigating through decarbonization challenges.
TOTAL SUPPLY-SIDE PATHWAY TOTAL SUPPLY-SIDE + EFFICIENCY PATHWAY

Pathways for decarbonization

Energy Mix Energy Mix

Electrification Energy
ProcessMix
emissions Energy
ProductMix
Innovation
► Shifting to zero carbon sources of energy ► Examples of end-use applications where ► Apart from energy-related emissions, ► In some industries such as automotive or
may seem like an obvious answer for electrification combined with zero carbon process emissions need to be given due fertilizer sectors, the most emissions-
decarbonizing any business. However, sources will have an important role consideration in applications ranging intensive value-chain segment is the use
the cost economics and business models include vehicles, heat pumps, thermal from cooling of buildings to industrial of the product itself. In others, the
for this transition has to be evaluated. processes in chemicals and cement, and processes that directly emit GHGs. upstream emissions are more significant.
The time horizon for new alternative reduction of iron for steel production. Reducing process emissions may require
► ► ► Product innovation and material
energy sources such as green hydrogen, ► Cost reduction in energy storage changes in technology, input materials or circularity are important pathways for
blue hydrogen, biofuels, and CCUS technologies will be an important enabler the product itself. decarbonizing value chains and
equipped fossil fuels has to be examined. for electrification. mitigating upstream or downstream
emissions.

Sector- specific approach: Each sector has its own sets of challenges and emissions hotspots which need to be considered in development of a decarbonization roadmap.

Navigating the Net Zero Landscape

 Global Climate Risk Barometer and TCFD Report Playbook

Repository of data on climate disclosures

EY’s Global Climate Risk Disclosure Barometer

rates companies on quality and coverage of
disclosures in line with the recommendations by
Coverage: the TCFD. We are equipped with a database of
Companies are 1000+ companies, scored through a multi-tiered
scored on the system on both the coverage and quality of the
basis of the TCFD recommendations. We leverage the database
percentage of
and methodology for carrying out gap analysis and
the 11 TCFD
recommendatio peer benchmarking of existing TCFD-aligned
ns addressed by disclosures.
them

Quality: Companies are given a rating (out of five) on the basis of the quality of the disclosure, expressed as a
percentage of the maximum score should the company implement all 11 TCFD recommendations

TCFD Guidance

In a 2019 review of TCFD To address this challenge, The We have developed this
disclosure practices, the Institute of International Finance TCFD Report Playbook to
TCFD Secretariat found (IIF) and the United Nations serve as a resource for
that while disclosure of Environment Programme Finance firms at different stages on
climate change information Initiative (UNEP FI), with the their journey toward fully
has increased, current support of EY, conducted a joint aligned and comprehensive
levels remain insufficient effort to support banks and other TCFD reporting.
for investors. financial institutions in their
efforts to strengthen climate risk
disclosures.

Navigating the Net Zero Landscape

 Why EY?

EY delivers decarbonization solutions leveraging a structured approach, network of specialists, knowledge

repository and a deep understanding of climate change risks and opportunities. We have extensive knowledge of
sustainability and climate change journeys of Indian and global businesses. Our leadership team includes
partners with proven capability of delivering decarbonization engagements globally.

Global team of 1000+

climate change and 1 Climate change knowledge 4
sustainability experts and over combined with digital capabilities including
100 strong in India building customized tools for emissions data
management

Sector-specific
2 5
Repository of data
understanding of from Climate Risk
decarbonization drivers, Barometer - analysis of 1000+
challenges and technology listed companies on TCFD disclosures
trends

EY’s own climate

3 6
Experience of ambition – to achieve net
facilitating zero emissions in 2025,
partnerships for with plans to reduce absolute emissions
decarbonization by 40% from 2019 baseline

Navigating the Net Zero Landscape

 Leadership Team

Sandip Khetan Chaitanya Kalia Shailesh Tyagi

Partner and Partner and Partner
National Leader National Leader
Financial Accounting Climate Change and Climate Change and
Advisory Services (FAAS), Sustainability Services Sustainability Services
EY India (CCaSS), EY India (CCaSS), EY India

Ernst & Young Associates LLP

Sailesh Rao Somesh Kumar Sunil Bhadu EY | Building a better working world

Partner Partner Partner

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EY India Utilities, EY India 150 countries provide trust through assurance and help
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answers for the complex issues facing our world today.
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Navigating the Net Zero Landscape