investment viewpoints

Can high emitters be net-zero leaders?

Can high emitters be net-zero leaders?


At LOIM, our way of deploying capital in the transition to a more sustainable economy differs from many low-carbon strategies. We do not only target businesses that already emit relatively low levels of carbon. Instead, we also seek out firms in economically important but emissions-intensive sectors – like steel and cement – that have ambitious and credible plans to decarbonise and whose progress might be underappreciated by the market. 

This provides opportunities to find value in equity markets, in our view. And by supplying capital to companies that are delivering material emissions reductions, it helps drive decarbonisation where it is most needed. Here we provide case studies to illustrate this conviction. 


Need to know:

  • Instead of focusing exclusively on low-carbon sectors, our TargetNetZero equity strategies aim to benefit from the growth potential created by the transition to a decarbonised economy and to help accelerate it
  • One of the best ways to find value, in our view, is by targeting businesses that are in economically important but hard-to-abate industries but are decarbonising in alignment with the Paris Agreement. In contrast to these potential opportunities, high-emitting decarbonisation laggards are risks to be avoided
  • We profile two ice cubes: aluminium producer Norsk Hydro1  and mining-equipment maker Epiroc1. Their climate ambition and decarbonisation progress so far should support their commercial prospects as the net-zero transition progresses, in our view


Not ‘low-carbon now’

Our TargetNetZero strategy seeks to identify companies that will transition faster than peers to net zero, as opposed to those that will transition more slowly or possibly not at all. We aim to find these climate leaders in all industries, and our strategy has broad-economy coverage with exposure to both high- and low-emitting sectors.

Companies in hard-to-abate sectors will still be needed even as the economy decarbonises. In our view, successful investing in the climate transition requires the ability to recognise which of those companies has credible decarbonisation targets aligned to the Paris Agreement, and strategies to achieve them. We call them ‘ice cubes’ because they contribute significantly to cooling the economy. In contrast, ‘burning logs’ are high-emitting companies without evidence of sufficient carbon-reduction plans.   

We identify ice cubes and burning logs through our implied temperature rise (ITR) methodology. The output of ITR is a temperature metric, expressed in degrees Celsius, which estimates the rise in global temperature that would result in 2100 if the whole economy acted with the same ambition as the company or portfolio in question.

Cool logic

We expect ice-cube companies to better manage transitional and liability risks in the net-zero transition, benefitting from market shifts as low-carbon solutions win more business in sectors across the economy. In our view, they are potential growth opportunities that could be currently mispriced by the market.

In comparison, focusing only on industries that are inherently low-carbon, such as IT and healthcare, creates sector concentration risk for investors, in our view. It can also exclude ice cubes in hard-to-abate sectors which, in addition to representing real opportunities, are driving genuine decarbonisation in emissions-intensive sectors. Companies that are already low-carbon have a minimal impact on the transition. 

We profile two ice cubes from the metals and industrial sectors below.


Case studies2



    Aluminium is lightweight, durable and recyclable, making it the material of choice for energy-efficient buildings, fuel-efficient mobility and recyclable packaging. We look to invest in aluminium manufacturers using technology to decarbonise production. 

    This involves either using more scrap as an input, more renewable power in the smelting process, or both. Such methods emit far less carbon than the more energy-intensive and polluting process of mining bauxite and refining it into alumina, or using fossil fuels to smelt the aluminium. 

    Norsk Hydro, based in Oslo, offers low-carbon products that are based on green energy, scrap, or a combination of the two. As a major producer of hydroelectric power in Norway, Norsk Hydro is the only large-cap, listed aluminium company with fully integrated energy and metal procurement. Having access to hydro power helps to lower the emissions of Norsk Hydro’s aluminium products. It aims to develop wind and solar farms to further decarbonise the aluminium business. 

    Based on our ITR methodology, Norsk Hydro has an overall temperature of 1.7°C, which is far lower than the average of 3.6°C for the metals and mining industry3.  The company has a decarbonisation target for scopes 1 and 2 emissions of 30% by 2030 from a 2018 baseline4.  

    In 2022, Norsk Hydro also set a target to reduce upstream scope 3 emissions per ton of aluminium delivered to the market by 30%, also from a 2018 baseline5. We are encouraged that Norsk Hydro is trying to make progress on scope 3, given that it accounts for more than half of the company’s emissions. Once this target gets incorporated into our ITR alignment methodology, Norsk Hydro’s temperature is likely to decrease even more, making it a strong leader in the decarbonisation of its high-emitting industry.

    In summary, Norsk Hydro is active in a sector that is crucial for the transition, and it is a best-in-class firm in terms of ITR. Progress against its decarbonisation targets is therefore highly impactful. 


    Epiroc is a Swedish manufacturer of specialised hard-rock mining and construction machinery, primarily upstream equipment such as drill rigs and tools, loader trucks and other rock excavation and construction equipment. It also provides aftermarket services, spare parts and maintenance.

    The company has developed a robust portfolio of electric solutions for underground mining, which pollute less and create a healthier environment than trucks running on fossil fuels. They eliminate the need for costly exhaust systems that remove toxic fumes emitted by diesel mining trucks underground. It also provides circularity solutions to customers on battery-as-a-service, recycling consumables and process optimisation software.

    In our view, Epiroc is also well-placed to benefit from increased demand for mining of materials such as copper, zinc and lithium that are needed to electrify the wider economy. 

    Around 84% of Epiroc’s overall emissions are attributed to scope 3 downstream activities and the remaining 16% to scope 3 upstream. Scopes 1 and 2 (emissions from Epiroc’s own operations) are negligible.

    Epiroc’s ITR on scope 3 downstream, which concerns emissions from the distribution, use, processing and waste management of the company’s products, is 1.8°C. This is largely driven by the comprehensive decarbonisation target the company has set, which: 

    • Is quoted in absolute reduction percentage terms, which we find is more rigorous than a target in intensity terms
    • Covers its most important category: the use of sold products
    • Has an ambitious level of 50% reduction by 2030 
    • Is externally validated as scientifically feasible and aligned with a 1.5°C ambition level by the Science Based Targets Initiative (SBTi)

    Our ITR assessment at 1.8°C is more conservative than SBTi’s, at 1.5°. This is because we overlay Epiroc’s recent decarbonisation performance data onto its forward-looking decarbonisation commitments. Nevertheless, the overall assessment places Epiroc within the Paris Agreement goal of 1.5°C-2°C, qualifying the company as an ice cube5.  

Having real impact

At LOIM, we understand that companies across the economy need to be weaned off fossil fuels if we are to curb greenhouse gas emissions and halt global warming. We believe that successful net-zero investing involves knowing which businesses are best positioned for the regulatory, technological and market changes ahead. 

We do not manage a ‘low-carbon-now’ portfolio. We are aligning to net zero while supporting greater decarbonisation in the economy, improving portfolio diversification and investing in companies whose growth prospects amid the transition may not be widely recognised. 

Ice cubes are not the norm, and there are not enough in our universe to fill a diversified portfolio. However, they can be found in all industries, and we favour attractive companies aligning to the Paris Agreement over decarbonisation laggards facing increased climate risk. 

A business that is committed to reducing its initially high emissions can be highly impactful in the global transition while also generating growth from the decarbonisation of the economy, in our view. This is the power of the ice cubes.

Learn more about how our TargetNetZero equities strategy helps investors decarbonise, diversify, and drive the transition.


Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document.
2 Important information on case studies:
The case studies provided in this document are for illustrative purposes only and do not purport to be recommendation of an investment in, or a comprehensive statement of all of the factors or considerations which may be relevant to an investment in, the referenced securities. The case studies have been selected to illustrate the investment process undertaken by the Manager in respect of a certain type of investment, but may not be representative of the Fund's past or future portfolio of investments as a whole and it should be understood that the case studies of themselves will not be sufficient to give a clear and balanced view of the investment process undertaken by the Manager or of the composition of the investment portfolio of the Fund now or in the future.
3 HolistiQ analysis, as of September 2023
4 annual-report-2022eng.pdf (
5 Company metrics are based on an analysis from HolistiQ, May 2023. holistiQ is a trading name of the Lombard Odier Investment Managers group (“LOIM”) and is not a legal partnership or other separate legal entity. Any dealings in respect of holistiQ shall be carried out solely through LOIM regulated entities and their authorised officers. Systemiq Limited is not a regulated entity and nothing in this website is intended to imply that Systemiq Limited will carry out regulated activity in any jurisdiction.


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