Asset managers commit to aligning $16tr of assets with net zero before 2050

Investors representing $16tr in assets under management have disclosed their initial targets for putting their portfolios on a path to net zero emissions by 2050 or sooner, according to the latest progress report from the Net Zero Asset Managers initiative (NZAM).

Among the 43 names to have set net zero goals include the world’s largest asset manager BlackRock, which has committed 77 per cent of its total managed assets initially to be aligned with net zero, while Danske Bank is targeting net zero across 68 per cent of its total assets, and Vanguard has initially agreed to align just four per cent of its total assets under management with net zero, according to yesterday’s report.

AXA has also increased its targets for the proportion of assets managed in line with achieving net zero by 2050 or sooner from 15 per cent to 65 per cent, as has Wellington which is now targeting net zero across 32.4 per cent of its assets, up from 10.6 per cent previously.

In addition, 11 asset managers have committed 100 per cent of their AUM to net zero – including Stafford Capital Partners and Ridgewood Infrastructure – bringing the total to 24 signatories with a combined AUM of over $530bn. NZAM has also seen 19 managers commit more than 75 per cent of their assets to net zero, while 30 signatories have aligned more than 50 per cent of their AUM, according to the report.

First established last year, NZAM is an international group of 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°C under the Paris Agreement. The initiative now has 273 signatories who together represent more than $61tr in assets under management (AUM), and forms part of the Glasgow Financial Alliance for Net Zero (GFANZ) umbrella group.

Edward Mason, director of NZAM Signatory Generation Investment Management, said achieving net zero emissions by 2050 the global economy and the halving of global emissions this decade “will require sustained action across all elements of the NZAM commitment by all signatories”.

“We have unquestionably seen a positive start towards these monumental goals, but we are now into the hard work, year on year, of delivery,” he said.

The latest targets disclosed in NZAM’s progress report yesterday mean that, collectively, approximately $16tr – out of a possible $42tr managed by those who have signed up to the initiative – is now committed to be managed in line with achieving net zero by 2050 or sooner. These $16tr of assets are also subject to climate targets consistent with a fair share of the 50 per cent global emissions reduction by 2030 identified as necessary in the UN IPCC special report on global warming of 1.5°C.

The $16tr sum represents approximately 39 per cent of those managers’ assets – up from 35 per cent when the first set of targets were published at COP26 last autumn.

Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change (IIGCC), described the latest commitments from within the NZAM initiative as “encouraging”.

“While there is some way to go, that $16tr of assets are now committed to be managed in line with achieving net zero by 2050, is a more than positive start – although targets must of course still translate into action,” she said. “I particularly welcome those who have been proactive and ratcheted-up their initial targets for in scope assets from those set only six months. I would encourage other managers with existing or yet to be set targets to be just as ambitious and proactive.”

However, the latest NZAM report also attracted criticism from some quarters, in particular over Vanguard’s meagre progress in aligning just four per cent of its AUM to net zero.

Lara Cuvelier, sustainable investments campaigner at the Reclaim Finance NGO, said the new targets disclosed yesterday pointed to a growing “gulf” between smaller, more agile asset managers and “the giants that seem determined not to take action on the huge fossil fuel holdings in their passive funds”.

“Because Vanguard’s climate target does not apply to its passive funds it only covers a derisory four per cent of the $7tr it manages,” she said. “These big, passive asset managers are claiming to prioritise dialogue with heavy emitters but there is zero evidence of any results from this supposed engagement. BlackRock, Vanguard and Co must address their passives problem and stop supporting the oil and gas majors’ climate-destroying plans to keep expanding oil and gas production.”

A version of this article originally appeared at Investment Week.

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