More than 80 asset owners have asked their private markets managers to adopt credible net zero strategies today.
The Net-Zero Asset Owner Alliance (NZAOA), whose 85 signatories include AkademikerPension, ERAFP, Allianz and Folksam, made six recommendations in its latest ‘call to action’ for private market asset managers.
Top of the list was a request for firms to be aligned with “a credible net-zero or portfolio-transition strategy focused on value creation and preservation”.
This should involve a time-bound, entity-level commitment covering “all material portfolio companies”, with interim targets.
“Clear governance and monitoring processes should be established to ensure that progress towards these targets is measurable and transparent,” the document stated.
Managers that have not yet established such targets should demonstrate that they are “actively working toward this objective, including through a structured assessment of feasibility and a defined timeline for progressing toward adoption”.
NZAOA emphasised the importance of introducing appropriate investment and management incentives to meet climate goals, and engaging with portfolio companies to drive change.
It also stressed the role of public messaging – a practice that has become less popular in recent years in response to opposition to net zero in the US, which has prompted the invention of the term ‘greenhushing’.
The group also called on private markets managers to step up the provision and use of climate data – in part by developing dedicated frameworks — and to better integrate physical risk and adaptation analysis into investment decisions.
Its final recommendations were focused on capital allocation: managers should consider opportunities to finance real-economy decarbonisation, and scale their investments in climate solutions “with clear criteria and impact reporting”.
NZAOA issued its inaugural Call to Action to Private Market Asset Managers in 2022, and said “the industry deserves credit” for the progress it has made since then.
However, it added, “significant gaps remain between stated ambition and integrating investment and stewardship levers available into day-to-day practices”.
“Climate ambitions and targets are often still not sufficiently trickling through to how firms are structured, how stewardship and engagement strategies are designed and executed, how risks are priced, how portfolio companies are managed or how investment and management incentives are structured.”
The latest Call to Action urged private markets managers to adopt long-term horizons and “not be swayed by short-term economic trends and policy uncertainties”.
