Fund Solutions

Global Asset Managers Swell Ranks of Net Zero Initiative

Signatory commitments include escalation and voting policy consistent with 2050 net zero targets.

The Net Zero Asset Managers initiative has more than doubled its membership and trebled its assets under management, with a host of global investment institutions pledging to achieve net zero greenhouse gas emissions (GHG) from their portfolios by or before 2050.

Launched in December, the initiative now has 73 signatories, representing US$32 trillion in assets under management, slightly more than a third of the global total. New signatories include Allianz Global Investors, Aviva Investors, BlackRock, Rathbones Greenbank Investments, Royal London Asset Management, and The Vanguard Group.

All signatories have agreed to a new commitment to set interim targets for 2030, “consistent with a fair share” of the 50% reduction in GHG emissions required to keep global warming to 1.5 degrees, as specified by the Intergovernmental Panel on Climate Change.

Within a year, new signatories must submit an interim target for the proportion of assets to be managed in line with reaching net zero emissions by 2050 or sooner. The target must be reviewed at least every five years, with the proportion of AUM ratcheted up until 100% of assets are covered.

Signatories are expected to report progress annually against Task Force for Climate-related Financial Disclosures (TCFD) recommendations and submit a climate action plan to The Investor Agenda or ensure the approach applied is based on a robust methodology, consistent with the Race to Zero criteria, and action is being taken in line with the commitments.

Commitments to asset owner clients by signatories include provision of information and analytics on net zero investing and the implementation of a stewardship and engagement strategy, including an escalation and voting policy “consistent” with achieving 2050 net zero targets. Signatories also commit to engaging with other parties in the investment value chain on product and service alignment with net zero goals, as well as ensuring that “relevant direct and indirect policy advocacy” is supporting of net zero goals.

New North American signatories include Brookfield Asset Management, the Canadian manager which appointed UN Special Envoy on Climate Action Mark Carney as head of ESG and Impact Fund Investing last August.

“Addressing climate change is a global imperative and one of the greatest commercial opportunities of our time. The world is entering a critical period in which ambition and effectiveness of sustainable investments must be transformed,” said Carney.

Focus on delivery

An advisory group has been established to consider and provide recommendations to the initiative’s founding partners on its operations and to serve as champions for its work.

“Our focus as advisory group members is resolutely on delivery. In time for COP26, the initiative must now focus on ensuring ambitious targets are set for assets to be managed in line with net zero by 2050 or sooner, using the rigorous methodologies required by the initiative,” said advisory group member Edward Mason, Director of Engagement and Impact Reporting, Generation Investment Management.

Founding signatories included BMO Global Asset Management, Fidelity International, Nordea Asset Management, Legal & General Investment Management, UBS Asset Management and Robeco.

The initiative is managed globally by the six founding partner investor networks: Asia Investor Group of Climate Change (AIGCC), CDP, Ceres, Institutional Investors Group of Climate Change (IIGCC), Investor Group of Climate Change (IGCC) and Principles for Responsible Investment (PRI).

The initiative is now accredited by the United Nations Framework Convention on Climate Change (UNFCC) Race to Zero campaign. It is also endorsed by The Investor Agenda, of which the investor networks are all founding partners, along with the United Nations Environment Programme Finance Initiative (UNEPFI).

Private equity climate initiative

On Friday, almost 90 private equity firms with US$700 billion AUM signed up to a new climate initiative supported by the Principles for Responsible Investment. Initiative Climat International (iCI) requires its members to contribute to the goals of the Paris Agreement and to actively engage with their portfolio companies to reduce GHG emissions.

The initiative aims to develop guidance for member firms by COP26, in addition to addressing key data and disclosure challenges in private markets by developing common metrics and methodologies for measuring and reporting GHG emissions (including Scope 3).

Signatories include Apax Partners, Cinven, CVC Capital Partners, HarbourVest Partners, PAI Partners, TPG and Triton. Fiona Reynolds, CEO of the PRI, said the industry’s progress on climate currently varied by firm and region.

“We are pleased to support iCI, which provides a much-needed vehicle for ESG practitioners and other PE professionals to collaborate on a common challenge. Its members are committed to sharing knowledge, tools, experience, and best practice methods amongst peers to better prepare general partners for the inevitable changes ahead as liquidity partners make their own net-zero commitments,” she said.

“It is great to see the momentum amongst private equity investors who are committing to take action ahead of COP26. The private equity industry has a vital role to play in financing the transition to net-zero,” added Nigel Topping, COP26 High-Level Climate Action Champion.

 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2021 ESG Investor Ltd. Company No. 12893343

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