The Net Zero Asset Managers Initiative is a global effort to cut carbon emissions by 50% by 2030. In addition to the net zero by 2050 target, asset managers have set targets to reduce emissions by 50% by 2030. As identified in the IPCC special report on global warming of 1.5degC, these targets represent 39% of asset managers’ total assets. These targets were published during the recent COP26 climate conference in Poland. In this article, we explore the goals and target sets of the initiative.
Goals of the initiative
In order to reduce greenhouse gas emissions, the net zero asset managers initiative requires signatories to meet the following goals: a 50% reduction in global emissions by 2030 and a net zero emission portfolio by 2050. The initiative is driven by investor networks. The asset management industry must strive to reach net zero emissions, or the goals of the Paris Agreement will be even more difficult to meet. The goals of the initiative are outlined below.
The initiative is led by the Net Zero Asset Managers, which are a group of 41 leading asset management firms with a combined total of USD$6.8 trillion in assets under management. The goal of the initiative is to align assets with the goals of the UNFCCC’s Race to Zero campaign. Signatories will engage with their clients and advocate for policy change to achieve the goals of the initiative. Their commitment is the most important component of the initiative, as they represent over 35 per cent of global assets under management.
Investor networks supporting the initiative
The goal of the net zero asset managers initiative is to embed a global ambition of reaching net zero by the year 2050. By making their investments more climate friendly, asset managers can accelerate this goal by investing in low-carbon, value-creating businesses. They also recognize the importance of investing in climate solutions and are creating investment products that support this goal. For these reasons, the net zero asset managers initiative is a positive step for asset managers and the climate movement alike.
The Net Zero Asset Managers initiative has attracted the support of some of the world’s largest asset managers, including BlackRock, Vanguard, State Street Global Advisors, and Wellington. Other notable signatories include BlackRock, Franklin Templeton, Wellington, and Neuberger Berman. The initiative is expected to grow rapidly, and it is hoped that more asset managers will join as signatories. Ultimately, investors will benefit from such actions.
Targets set by asset managers
A number of investors have committed to achieving net zero by 2050. Among them, 24 have committed 100% of their assets, totaling $530 billion. Thirty asset managers have committed at least 50% of their assets. The remaining 19 are not yet committed to net zero. The following list is a partial list of asset managers that have committed to net zero:
Among these asset managers are BlackRock and Asteria Investment Managers. BlackRock has committed 77% of its assets to meeting their net zero goals and is reducing its investment portfolio by $200 billion. Another firm, Asteria Investment Managers, has committed $200 million to net zero reduction plans. According to Conway Irwin, director of S&P Global Commodity Insights, more asset managers are committing to net zero.
Despite the high level of commitment, asset managers have a long way to go to reach the goal. The climate-friendly objectives of many asset managers are challenging and complex. Many of them fail to consider the risks that accrue to their investors, causing them to be unable to make informed decisions. But if they can achieve net zero, they should do it. And they should do it now. And it starts by identifying their customers.
Measurement of progress against targets
The NZAM (Net Zero Asset Managers Initiative) is a coalition of international asset management companies that promotes investments aligned with achieving net-zero greenhouse gas emissions by 2050. Its core principles include policy advocacy and corporate engagement, and its signatories represent $57 trillion in AUM. The coalition is supported by CDP, the Asian Investor Group on Climate Change, and the Investor Group on Climate Change.
So far, 43 fund managers have disclosed their first-half targets for net zero by 2050. As of July 2014, these managers have committed USD 4.2 trillion of their $11.9 trillion assets. However, this figure is not necessarily accurate as a large proportion of the funds’ assets are passively managed. According to an analysis by the environmental non-governmental organisation Reclaim Finance, 45% of the assets managed by the world’s 29 largest fund managers are passively managed.