Committing to 16–29% reductions, asset owners will “actively engage” to reduce carbon emissions across industry sectors.
The UN-convened Net-Zero Asset Owner Alliance has outlined its 2025 decarbonisation targets in the group’s final ‘Inaugural 2025 Target Setting Protocol’ report. The group of 33 asset owners, with combined assets of US$5 trillion, first announced plans for reducing carbon emissions in their portfolios in October 2020, welcoming comment from industry.
Each member will publish its own decarbonisation targets within an agreed 16% to 29% reduction range before COP26 in November. Members will be responsible for “actively engaging” with companies in their portfolios in order to follow through on their pledge to deliver deep emissions cuts within the five-year period.
Members of the Alliance include Allianz, the Church of England Pensions Board, and Aviva.
“Issuing transparent, rigorous and realistic targets, and then committing to report against them in the next 4 years, is at once an extraordinary – and also essential – demonstration of ambition by private sector leaders who exist at the pinnacle of our financial system,” said Christiana Figueres, former UNFCCC Executive Secretary and Founding Partner of Global Optimism, a strategic and scientific partner of the Alliance.
The UN-convened Alliance further lobbies for more government action to add pressure to companies that prove to be more reticent to decarbonisation attempts.
Asset owners in the Alliance will use “science-based ranges, targets and methodologies”, the report noted. “Members are responsible for employing the recommended science-based criteria outlined herein or explaining why they chose an alternative target or methodology.”
The Alliance members targets are set on the asset owner’s own Scope 3 emissions, also known as “portfolio emissions”, although the asset owners are “encouraged to set net-zero targets on their own Scope 1 and 2 emissions, as possible”.
The report outlined the four-part targets the Alliance will be striving to meet, with updated interim targets expected every five years: engagement targets (engage with 20 of their portfolio’s high-emitting companies); sector targets (intensity-based reductions across industries within their portfolios, e.g. oil and gas); sub-portfolio emission targets (reductions on listed equity and publicly traded corporate debt); and financing transition targets (report on progress on climate-positive investment, e.g. renewable energy in Emerging Markets).
“This protocol, and the individual investor targets that will follow, represents the first-time major investors are making such transparent commitments, from pension funds to private insurance companies, to sovereign wealth funds,” the report said.
“The founding of the Alliance and the publication of the Protocol has set the net-zero implementation ball rolling. Investors and companies across the globe must follow by publishing their own rigorous, science-based and accountable targets,” added Günther Thallinger, Alliance Chair and member of the board of management at Allianz SE.
Last year, the Alliance called for the cancellation of “all new thermal coal projects” in a move that solidified their intent to lobby for an industry-wide acceleration in decarbonisation efforts.
Financial services provider Aegon yesterday reiterated its pledge to meet its net-zero emissions by 2050 within its auto-enrolment default pension funds. Aegon aims to cut carbon emissions associated with its default funds in half by 2030.