86 asset managers – the largest group to date – have disclosed their initial targets for the proportion of assets managed in line with achieving net zero by 2050 or sooner. All targets are now available on the Net Zero Asset Managers initiative (NZAM) website and follow May’s target disclosure report.
The latest targets mean that, collectively, approximately USD 21.8 trillion – out of a possible USD 55.3 trillion managed by the asset managers who have set targets to date – is now committed to be managed in line with achieving net zero by 2050 or sooner.
A starting point only
The initial targets are only a starting point and represent what asset managers can feasibly commit to today.
Collectively signatories have now committed on average 39% of assets to net zero by 2050, with all NZAM signatories committing to ratchet up their assets committed to net zero with a view to reaching 100%. Achieving this, however, is dependent on numerous factors including the mandates agreed with clients, clients’ and managers’ regulatory environments, supportive policy environments and the development of target setting methodologies for all asset classes.
For the latter, most targets set to date cover listed equity and fixed income due to available target setting methodologies for both asset classes, whereas fewer cover other asset classes, such as private equity and infrastructure, due to the nascency of supporting target setting methodologies. NZAM’s intention is that as methodologies develop to cover more asset classes, as illustrated by the ongoing development and broadening of the Net Zero Investment Framework (NZIF), additional asset classes will be incorporated into targets.
Approaches to target setting
Across the 169 initial targets submitted to date, 87 use the Paris Aligned Investment Initiative Net Zero Investment Framework (NZIF), 39 use the Science Based Targets initiative for Financial Institutions (SBTi), 9 use the UN-convened Net Zero Asset Owner Alliance Target Setting Protocol (TSP), 23 use a combination and 11 use own/other methodology.
Stephanie Pfeifer, CEO, IIGCC, said: “In less than two years the Net Zero Asset Managers initiative has managed to significantly raise the scale of ambition towards net zero across the global asset management industry. Building on the initiative’s positive start, the focus must now be on supporting managers to increase their targets and turning commitments into action with an emphasis on supporting real world emission reductions – without this, the likelihood of limiting temperature rises to no more than 1.5 degrees becomes more distant.”
Rebecca Mikula-Wright, CEO, the Asia Investor Group on Climate Change (AIGCC) and the Investor Group on Climate Change (IGCC), said: “As more investors join these initiatives, set their initial targets, and get access to the tools and networks that support their work, they get themselves on a faster trajectory to managing down the risks of climate change, and positioning themselves to invest wisely in the transition.”
“Global investor collaboration has been critical to progress towards net zero, and a holistic approach of engaging with policy makers and business is essential for the clean energy transition to accelerate and to scale the investment required by 2030, only 85 months away.”
Mindy Lubber, CEO and President, Ceres, said: “Asset managers from all over the globe have pledged to support aligning their investments and portfolios with a net zero future and joined the Net Zero Asset Managers initiative because they know that transitioning the economy away from carbon intensive operations and production of goods is underway and the only trajectory for a thriving, sustainable economy. The progress these asset managers have made in transitioning their own portfolios provides some assurance that capital flows are gradually shifting to where they need to be.”
David Atkin, CEO, Principles for Responsible Investment (PRI), said: “This latest round of targets, released by NZAM signatories, is a welcome indicator of the ongoing shift to a global net zero financial system. We know that there is still work to be done to assist NZAM signatories in overcoming the systemic barriers to net zero, and we look forward to continuing our important work to this end. But these targets should be welcomed, as a strong indicator of investor ambition, and as a baseline for future progress.”