Dive Brief:
- The UN-backed Net Zero Asset Owner Alliance said it now has 86 companies with over $9.5 trillion assets under management, according to its third annual progress report released last week. Twelve additional members joined the climate alliance between August 2022-2023.
- Sixty-nine of the group’s members have set intermediate climate targets to reach net-zero emissions by 2050, up from 44 members who did so last year. The targets align with the Intergovernmental Panel on Climate Change’s scenarios for no or little overshoot of 1.5°C global temperature rise.
- The group's growing membership comes as international regulators are increasingly requiring companies to disclose their greenhouse gas emissions and climate-mitigation targets. The report also calls for policymakers going to the upcoming COP28 climate change conference to scale up net zero transition-planning.
Dive Insight:
All members of the alliance commit to transitioning their investment portfolios to reach net-zero greenhouse gas emissions by 2050, establishing intermediate carbon reduction targets every five years and reporting on progress annually. The coalition said such target setting is having a measurable effect on financed greenhouse gas emissions.
The report said despite the coalition’s growth, the membership’s absolute combined financed emissions fell from the equivalent of 221.2 million tons of carbon dioxide in 2021 to the equivalent of 213.4 million tons CO2 in 2022.
“Alliance members are making solid progress towards achieving their 2025 emissions targets, showing that, step-by-step, the crucial long-term transition to achieve 1.5°C can be implemented,” alliance chair Günther Thallinger said in a release. “As we head towards at least 2.4°C warming with current climate pledges, we are at a pivotal moment to strengthen efforts for system-wide transformation.”
The alliance has members set targets for engagement and climate solutions financing, as well as both sub-portfolio and sector-specific targets. Members must set targets in three of the four categories. Sub-portfolio targets cover any asset classes that have “credible methodologies and sufficient data coverage exist as of the date of the target’s publication,” and will become portfolio targets once full coverage becomes available. Currently, those asset classes are corporate debt, listed equity and directly held real estate.
Last year was the first time 100% of the alliance's members who were required to report — 69 of the 86 — set engagement targets. The 17 other members will be required to disclose targets during the next reporting cycle. Sixty-seven members now have sub-portfolio targets,up from 41 in 2022. The coalition’s target-setting protocols call for sub-portfolio goals to target an average of 22%-32% carbon dioxide emissions reduction by 2025 and 40%-60% by 2030.
Sixty-eight of the 69 companies with intermediate targets set have disclosed climate solutions financing goals and more than $380.6 billion has been invested in climate solutions. The report said much of the investments have gone toward the buildings and energy sectors, representing 84% of investments that can be allocated to a particular sector.
The group's membership breakdown includes 75% insurance or reinsurance companies, 17% pension and retirement funds, 8% sovereign wealth or government controlled funds and 0.1% endowments or philanthropic ventures.
While there is high participation in target-setting on engagement, sub-portfolios and climate solutions financing, sector target setting lags significantly behind: Only nine companies have set sector targets.
The group said asset managers and investors are looking for policymakers to create a policy environment that enables climate action and urges attendees of the UN’s international climate change conference in the United Arab Emirates to scale up its push toward net-zero.
The report asks COP28 attendees to accelerate implementation of long-term domestic policies; scale up the reforms of finance and investment frameworks, as well as multilateral financial architectures; and implement policies that integrate net-zero transition planning across governments.
“Effective climate action should be enabled by strong political commitments that are backed up by clear action plans across multilevel policy domains,” the report says. “Such action should also be developed through inclusive governance processes to ensure transparency and accountability.
