What is the Net Zero Asset Managers initiative?
The Net Zero Asset Managers initiative is a group of international asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5 degrees Celsius; and to supporting investing aligned with net zero emissions by 2050 or sooner.
It is an initiative designed to mobilise action by the asset management industry that demonstrates leading practice in driving the transition to net zero and delivers the ambitious action and investment strategies that will be necessary to achieve the goal of net zero emissions. It also provides a forum to share best practice and overcome barriers to aligning investments to that net zero goal.
The initiative will be managed globally by six Founding Partner investor networks, namely: Asia Investor Group on Climate Change (AIGCC), CDP, Ceres, Investor Group on Climate Change (IGCC), Institutional Investors Group on Climate Change (IIGCC) and Principles for Responsible Investment (PRI). In turn, the initiative is endorsed by The Investor Agenda, of which the investor networks are all founding partners.
Who are the signatories?
The signatories are a range of asset managers from around the world who are all committed to the goal of a net zero future. Our 273 signatories to date manage over USD 61.3 trillion of assets*.
*Figures are as of 31 May 2022
What does a signatory commit to?
A signatory commits 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°Celsius. It also commits to support investing aligned with net zero emissions by 2050 or sooner. Please see the commitment in full here.
Why do we need the Net Zero Asset Managers initiative?
In line with the best available science on the impacts of climate change, we acknowledge that there is an urgent need to accelerate the transition towards global net zero emissions. Asset managers are responsible for investing trillions of dollars of capital. How these assets are managed will be key to whether not we are able to achieve the global goal of net zero emissions by 2050 or sooner. The initiative is designed to enable and accelerate for the role that asset managers play in helping to deliver the goals of the Paris Agreement and ensure a just transition.
What is the reach of the Net Zero Asset Managers initiative?
Our 273 signatories to date manage over USD 61.3 trillion of assets*. The transition to net zero will be the biggest transformation in economic history. The opportunities to allocate capital to this transition over the coming years cannot be underestimated. Our industry’s ability to drive the transition to net zero is extremely powerful. Without our industry on board, the goals set out in the Paris Agreement will be difficult to meet.
*Figures are as of 31 May 2022
How will the Net Zero Asset Managers initiative effect change?
The Net Zero Asset Managers commitment sets out a range of actions that asset managers will take forward which are the key components required to accelerate the transition to net zero and achieve emissions reductions in the real economy: Engaging with clients, setting targets for assets managed in line with net zero pathways, corporate engagement and stewardship, policy advocacy. Please take a look at the Net Zero Asset Managers commitment which sets out the activities that signatories commit to undertaking. These activities will have a significant impact when carried out at the scale of our members’ reach.
How will this shift capital allocation at the pace and scale necessary?
The commitments of the Net Zero Asset Managers initiative embed the ambitious goal of net zero by 2050 or sooner, and expect asset managers to ratchet up the proportion of assets managed in line with net zero goals. Recognising the importance of increasing investment in climate solutions, creating investment products that facilitate investment in climate solutions is also part of the commitment.
How is Net Zero Asset Managers initiative different from other investment initiatives?
We are the only global initiative specifically focused on asset managers getting to net zero. The initiative is endorsed by The Investor Agenda and managed by six ‘founding partner’ investor networks: Asia Investor Group on Climate Change (AIGCC), CDP, Ceres, Investor Group on Climate Change (IGCC), Institutional Investors Group on Climate Change (IIGCC) and Principles for Responsible Investment (PRI). We will collaborate with each other and other investors via such initiatives so that investors have access to best practice, robust and science-based approaches and methodologies, and improved data, through which to deliver these commitments.
How does Net Zero Asset Managers work with other net zero initiatives for investors?
A number of initiatives supporting investor action towards net zero are accredited by the UN Race to Zero campaign. These include the Net Zero Asset Managers, the Paris Aligned Investment Initiative and the UN Convened Net Zero Asset Owners Alliance. All accredited initiatives share a common objective in relation to achieving net zero global GHG emissions by 2050 or sooner, and signatories of these initiatives will have to meet the Race to Zero criteria including managing portfolios towards net zero emissions and setting interim targets by 2030 or sooner. However, each initiative has its own governance structure and approach to supporting signatories. The initiatives collaborate and share best practice through their involvement in the Glasgow Financial Alliance for Net Zero (GFANZ), convened by Mark Carney, UN Special Envoy on Climate Action and Finance, to facilitate coordination between all net zero initiatives focussed on the financial sector.
How does this go beyond what asset managers are already doing?
Several asset managers are taking forward actions that relate to elements of the commitment. But the Net Zero Asset Managers initiative is a step change. It requires those actions, such as engagement, to be in line with the net zero goal and anticipates increasing the scope of assets being managed in line with the net zero goal until 100% is reached. Asset managers will also have to report on their actions and update their targets regularly bringing transparency and accountability to this action.
If only a proportion of assets is being managed in line with net zero, surely this just means business as usual? Isn’t this just greenwashing?
The commitment recognises that asset managers are managers not owners. They have limited jurisdiction to make ex-ante decisions on much of their AUM. However, the commitment ensures that asset managers will have to work with their clients and are expected to ratchet up the proportion of assets managed in line with net zero goals. The commitment also ensures that several important actions – such as stewardship and policy advocacy – are comprehensively implemented. Combined with the reporting components of the commitment, we are ensuring this means real action not just empty statements.
Shouldn’t governments be leading on this type of initiative?
We are very aware that the private sector needs to play its part in driving forward the transition to net zero. Our commitments are made in the expectation that governments will follow through on their own commitments to ensure the objectives of the Paris Agreement are met.
By when do signatories have to set their interim target for the proportion of assets to be managed in line with the attainment of net zero emissions by 2050?
Managers should set their interim target within a year of making the Net Zero Asset Managers commitment.
Isn’t 2050 too far away?
Signatories will be required to set interim targets for 2030, consistent with a fair share of the 50% global reduction in CO2 identified as a requirement in the IPCC special report on global warming of 1.5°C.
Will this commitment constrain companies?
To ensure a just and sustainable future, we believe the private sector needs to play its part in driving forward the transition to net zero. This commitment provides a framework to help asset managers on this journey.
Does this mean asset managers divesting at scale from high carbon companies?
The commitment aims to ensure signatories are managing an increasing proportion of the assets in line with net zero goals. This does not necessarily mean asset managers need to divest a given asset. As set out in the commitment, engagement and stewardship are key levers and managers have to ensure assets that they manage are themselves decarbonising in line with net zero goals and may have more impact on real economy emissions than simply divesting. That said we expect asset managers to be factoring in assessment of the alignment or potential alignment of assets in their investment decision making processes, which may result in decisions not to allocate capital to high carbon investments.