UN-convened asset owner alliance publishes progress report on members’ portfolio decarbonisation.
The Net-Zero Asset Owner Alliance (NZAOA) has called on companies and data providers to provide sector–specific data on greenhouse gas (GHG) emissions reductions, as it seeks more detail on investee firms’ decarbonisation efforts. At present, the NZAOA said, sector– specific data from companies “remains insufficient, unreliable, incomparable, or non-existent”.
The NZAOA, which is comprised of 74 members, has “urgently” asked companies in sectors including oil and gas, steel, cement, and utilities to “prepare and transparently disclose forward-looking decarbonisation transition plans”. The alliance wants transition plans to be published in line with disclosure frameworks such as those developed by the Task Force on Climate-Related Financial Disclosures (TCFD), International Sustainability Standards Board (ISSB), and the European Financial Reporting Advisory Group (EFRAG).
As a result of not having full access to data, the NZAOA said investors are “not able to fully steer investment portfolios in line with sector decarbonisation pathways or to set science-based targets at the sector level”. The alliance also said recent consultations by the ISSB and EFRAG had highlighted the “importance of access to sector-specific data”.
The group particularly called on companies to “provide current data as well as forward-looking guidance, including five- and ten-year targets”. In addition, the alliance asked data providers to “support the collection and dissemination” of companies’ data on certain metrics. It said the change is needed to allow members to stay “invested in and providing capital to transform even the[se] hard-to-abate sectors”.
Second time around
The NZAOA’s call to action coincides with the launch of its second progress report, which it says underlines the “significant growth and implementation” of credible investor commitments to decarbonisation and capital deployed in climate solutions.
The alliance’s 74 members have approximately US$10.6 trillion in assets under management, and 44 are now setting “proactive targets” to reduce GHG emissions in line with the Intergovernmental Panel on Climate Change’s 1.5°C pathways, an increase from 29 members last year.
Of those 44 members, 41 – including Swiss Re, Allianz, Munich Re and Dai-Ichi Life – have now set strict targets to reduce total portfolio emissions across four asset classes by at least 22% by 2025 or by at least 49% by 2030. These commitments cover more than double the assets under management committed last year: up from US$1.5 trillion to US$3.3 trillion.
Günther Thallinger, NZAOA’s Chair, said: “We need investors from all corners of the world to act at scale, at pace and together with national governments to make this the decade of transition despite the many other crises affecting the global economy. That’s why the alliance calls on policymakers to make systemic changes, such as enabling the scaling of blended finance vehicles to mobilise investment in emerging markets and implementing well-designed carbon-pricing mechanisms for cost-effective decarbonisation.”
By joining the NZAOA, members commit to transitioning their investment portfolios to net zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial levels, establishing intermediate targets every five years, and regularly reporting on progress.
The alliance says its investors should “encourage” investee companies to report annually on decarbonisation progress using these key performance indicators. The metrics include gCO2(e)/MJ for oil and gas, tC02(e)/MWh for utilities, gCH4/MJ for oil and gas and utilities, tC02(e)/tonne of cementitious product for cement and tCO2(e)/tonne of crude steel for steel.
This year will see 20% of alliance members setting targets disclosed sector-specific targets for 2025. This will allow them to track their transition within a sector, rather than across sectors, in line with sector decarbonisation models and pathways such as the International Energy Agency’s (IEA) Net Zero by 2050 roadmap and the One Earth Climate Model (OECM). The alliance aims to increase this number and believes the “key is closing the sectoral data deficit in the real economy”.
A chance for change
The NZAOA report also includes a call on governments to make key changes to policy ahead of COP27, which opens 6 November. Thallinger said that the upcoming COP27 summit “represent a significant opportunity to lay the financial infrastructure which can more rapidly transition the economy to net-zero.”
The recommendations made by NZAOA include delivering enhanced nationally determined contributions (NDCs) with “stronger ambition and details for implementation”, implementing long-term domestic policies enabling the “just transition towards a net-zero emissions economy”, and continuing to reform existing finance and investment policy frameworks so that they “direct investment towards net-zero goals, ensuring long-term policy clarity and direction”.
The report said: “Alongside the pursuit of long-term climate objectives, the world must find ways to urgently address the trilemma of energy security, cost-of-living, and climate crises. Governments must convene in Sharm el-Sheikh to swiftly embed the global scientific consensus in submitting and implementing their ratcheted NDCs, while placing disproportionately affected regions and communities in the centre of their action plans.”