Year: 2024

By Rebecca Mikula-Wright, CEO of AIGCC and IGCC and NZAM Steering Committee Chair 

As we approach COP29, which (roughly) coincides with the fourth anniversary of the Net Zero Asset Managers (NZAM) initiative, it’s an excellent moment to reflect on progress and reaffirm the individual commitments of NZAM signatories to accelerating the transition to a net zero global economy. 

NZAM was launched to mobilise and support asset managers in taking ambitious action, helping them set interim targets and track their progress aligning investments with the Paris Agreement goal of limiting global warming to 1.5 degrees Celsius – the climate scenario with the greatest net economic benefit. 

Now, with more than 325 signatories to the initiative, we will continue to focus on supporting investors to deliver on their fiduciary obligations to manage the financial risks and opportunities associated with climate and to enhance long-term value for their beneficiaries.  

LAYING FOUNDATIONS

NZAM was born out of a recognition that climate change poses a systemic risk to investors that no individual investor can address alone. Through their stewardship and asset allocation, asset managers can contribute to the steering of global capital towards sustainable, innovative, and resilient investments, and a net zero economy.

However, governments living up to their own commitments under the Paris Agreement is crucial to NZAM signatories meeting their own targets and avoiding the climate-related financial risks to their portfolios. The UN’s annual climate conferences (COPs) have always been catalysts for increasing action. We hope this year’s conference will be the same, prompting policymakers to again raise their own ambition, fostering an environment where the investment industry can play its part taking the opportunities of a net zero future. Through the 2024 Global Investor Statement to Governments on the Climate Crisis, more than 600 investors, including over 100 NZAM signatories, will call on government leaders to implement policies that will unlock the private capital flows needed for a just transition to a climate-resilient, nature-positive, net zero economy.

MEASURING PROGESS

The latest data from 2023-2024 preliminary reporting, based on responses from 170 asset managers, shows how NZAM signatories have been working to implement their net zero commitments.

Where signatories have been putting their climate focus.

In the past 12 months, signatories have been taking a range of actions to implement their individual net zero commitments. More than 80% have been engaging with investees on climate as a material issue and creating internal systems to integrate climate considerations into their investment processes.

Where signatories have been seeing outcomes.

Signatories indicate that they are seeing material progress as a result of their efforts: 73% reported contributing to increased net zero ambition and action of their investees, and 46% said their actions contributed to real-economy emission reductions by portfolio companies. 47% of signatories reported advancements in facilitating investments in climate solutions. Importantly, 26% of respondents reported progress in more than two of these areas.

The headwinds to climate progress.
Despite these advancements, challenges still hinder signatories’ progress, namely data availability (reported by 58%), methodology development for specific asset classes or strategies (49%), client awareness (38%), and the mispricing of risk (28%).

While signatories may work around these challenges as best they can to reach their targets, the data shows that their work exists in a broader context. It shows the need for continued climate innovation, education, and collaboration within the financial sector and broader economic system, and the recalibration of market incentives in line with a net zero global economy to overcome these obstacles.

LOOKING AHEAD

NZAM continues to grow, and the signatory base continues to make progress setting targets and progressing towards them.

In the year ahead, the Network Partners who run the initiative will look for opportunities to maintain that growth, continuing to reach and support more investors. Existing signatories can continue to rely upon the initiative to provide the best, most usable frameworks and processes for declaring climate objectives and showing their ongoing commitments.

As we live through, or see, more frequent physical damage, disruption and the massive costs to economies and communities from climate change, there is an urgent need to accelerate the transition towards global net zero emissions. NZAM’s goals of catalysing mainstream adoption of net zero commitments, and aligning capital to the ambitious, and necessary, climate goals remain as compelling as ever.

• As of 31 January 2024, the total number of asset managers that have set individual initial targets increased to 264. 
• Most targets focus on real economy decarbonisation. Decarbonisation targets are the predominant target type (62.5%), followed by alignment targets (53%), and engagement targets (35%). 
• 98% have set interim targets for/before 2030, with 26% targeting as early as 2025. 

Tuesday 23 July 2024: The Net Zero Asset Managers (NZAM) initiative has released its latest Target Disclosures Report, which highlights the increase in voluntary, individual net zero commitments and targets from the asset management industry over time.

The full report – Net Zero Asset Managers Target Disclosures Report 2024– can be accessed here.
All target disclosures can be found here.

Since the last target disclosures announcement, more than 30 asset managers have joined the initiative and over 90 have disclosed targets. As of 31 January 2024, 264 signatories have set and disclosed targets to guide their individual net zero investment practices. 

The report highlights the significant growth of the initiative since its inception in December 2020. Currently, more than 325 asset managers, representing over USD 57.5 trillion in assets under management, have made individual commitments, consistent with their fiduciary duties to clients and beneficiaries.

The report gives new insights into the geographical makeup of the initiative’s signatory base and details the target-setting methodologies used. It offers an overview of the types of targets and combinations utilised, providing signatories with valuable benchmarking opportunities and insight into industry-wide trends. 

Key highlights include: 

• Target types: Reflecting signatories’ collective ambition of mitigating financial risk through real economy decarbonisation, decarbonisation targets emerged as the predominant  target type (62.5%). 53% of signatories with target disclosures have set alignment targets, and 35% have set engagement targets.
• Target years: NZAM signatories are taking the imperative to address climate risk in the short term as well as long term, with 98% having set interim targets for or before 2030, and over a quarter (26%) having a first target of next year, in 2025.
• Methodological approaches: 51% of disclosing signatories use Paris Aligned Investment Initiative’s Net Zero Investment Framework; 22% use Science Based Targets initiative for Financial Institutions; 14% use the Net Zero Asset Owner Alliance Target Setting Protocol, 12% use a combination of the above methodologies, and 10% chose to use their own unique methodology. 
• Asset classes: Listed equities and corporate fixed income have the highest inclusion rates. 
• Geographical breakdown: The initiative reflects a global commitment with the signatories being headquartered in over 35 countries. Europe leads in representation, with over 200 signatories, followed by North America with over 70, and Asia with over 20. Oceania follows with 17 signatories, whilst South America and Africa have seven and one signatory, respectively. 

Members of the NZAM Steering Committee: 

Rebecca Mikula-Wright, CEO of Asia Investor Group on Climate Change (AIGCC) and Investor Group on Climate Change (IGCC), said: “Today’s Target Disclosures Report demonstrates the growing commitment asset managers have made towards the goal of net zero. The increase in asset managers setting and disclosing targets highlights our industry’s proactive stance on mitigating the financial risk associated with climate change.
“This momentum must continue in the Asia-Pacific. We now need to see more granular and ambitious interim targets that work towards real economy decarbonisation goals.
“Investors who have set and disclosed their targets are at a competitive advantage, showing their ability to manage the risks and opportunities in the global transition to a net zero economy.” 

Mindy Lubber, CEO and President of Ceres, said: “This latest target disclosures report highlights the meaningful progress of asset managers in addressing risks and opportunities as they transition to a net zero future. It’s encouraging to see asset managers worldwide setting ambitious net zero emissions targets and implementing concrete transition plan strategies to address climate risks and seize investment opportunities across their portfolios.” 

Stephanie Pfeifer, CEO of IIGCC, said: “The report provides further evidence of investors taking action to address the financial risks and opportunities associated with arguably the major trend of our time – the decarbonisation of the global economy. While there are commitments and examples of progress from hundreds of investors globally, its notable that Europe has the highest representation with over 200 signatories – this suggests a more conducive policy and regulatory environment, particularly in the UK and across the EU.”

ENDS

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About Net Zero Asset Managers

 The Net Zero Asset Managers initiative (NZAM) is an investor-led initiative. Through NZAM, more than 325 independent asset managers responsible for over USD 57.5 trillion in assets under management have committed, consistent with their fiduciary duty to their clients and beneficiaries, to support the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5°C; and to support investing aligned with net zero emissions by 2050 or sooner. 

Media contact

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