The goals of the Paris Agreement remain “totally valid” despite growing doubts about the prospects of limiting global warming to 1.5°C, according to the head of the Net Zero Asset Owner Alliance (NZAOA).
A recent report by the United Nations Environment Programme (UNEP) concluded that exceeding 1.5°C was now very likely, given the lack of progress in decarbonising the global economy and the current policy landscape.
Attention should therefore turn to developing plans to bring temperatures back below 1.5°C after the threshold has been breached.
In its latest progress update, published yesterday, NZAOA described the findings as a “cause for concern, but not despair”.
“Indeed, it pushes signatories to double down on their core mission of transitioning to net zero by 2050,” it stated.
Speaking to IPE, Josselin Kalifa, chief investment officer of Caisse des Dépôts’ asset management division and NZAOA co-chair, said the alliance was “very much staying aligned with net zero, but we’re taking stock of what’s happened since the creation of the alliance”.
The role of the 1.5°C target and “which goals will be relevant for NZAOA signatories” were discussed at the alliance’s recent general assembly, he said, adding that “we feel the Paris Agreement remains totally valid”.
NZAOA will formulate an official position before the end of the year.
The goal of reaching net zero remains in place, but of course we have to be realistic about the projections
“The goal of reaching net zero remains in place, but of course we have to be realistic about the projections, and aim to limit as much as possible the overshoot above 1.5°C and to go back as soon as possible to this level,” said Kalifa.
Other asset owners have taken a more pragmatic approach to their climate targets and assumptions.
In March, for example, the £40bn UK pension scheme People’s Pension replaced its 1.5°C-aligned portfolio target with an approach “emphasising practical, evidence-based action”.
It retained its ambition to align with the ultimate goal of the Paris Agreement – limiting global warming to “well below” 2°C – but said the world was not on track to stay below 1.5°C.
Last week, Norwegian asset manager Storebrand confirmed that it was switching its baseline climate scenario to one based on 3°C of warming.
Storebrand had previously used a baseline based on Nationally Determined Contributions (NDCs), the country-level climate pledges made under the Paris Agreement. These are estimated to put the world on course for 2.3°C of warming by 2100.
However, the change does not affect Storebrand’s climate targets.
“The decision to switch from using the NDCs scenario to the Current Policies scenario reflects our assessment of the world as it currently stands, rather than any change in our own climate ambitions,” said Daniel Stensrud, a senior ESG data analyst at Storebrand.
He added that recent developments suggest “that the gap between stated climate ambitions and enacted policies remains significant, and we therefore consider a higher-temperature scenario to provide a more robust basis for assessing portfolio risks”.
The change “does not represent a shift in our commitment to net zero or to the goals of the Paris Agreement – rather, it concerns the assumptions we use to evaluate climate-related risks and opportunities”, he told IPE.
Climate change could cut pension fund returns by up to 30%, Ortec Finance warns
Climate change could reduce long-term pension fund investment returns by 10-30% by 2050 under a scenario of 2.8°C warming by the end of the century, according to analysis by Ortec Finance.
The firm’s 2026 global pension fund analysis examined 180 portfolios across six major pension systems: the UK, US, Canada, Australia, the Netherlands and Switzerland.
It warned that climate change could increasingly affect pension portfolios through weaker economic growth, inflation, deteriorating public finances and sovereign credit risk.
Under its high-warming scenario, which assumes temperatures rise by 3.8°C by 2100, sovereign bond valuations are projected to decline by 5% in the UK, 17% in the US and 18% in China as investors reprice climate-related fiscal and economic risks.
The report argued that climate change should be treated as a core investment consideration rather than a remote tail risk, with implications for portfolio resilience and retirement outcomes.
