The Net Zero Asset Owner Alliance (NZAOA) expects its signatories to step up their efforts in the private market space during the initiative’s next phase.
In its latest annual progress report, the group said its members had achieved 78% of their targets for engagement with the broader economic ecosystem, including portfolio companies, asset managers, sectors and value chains.
The targets are defined and monitored by the asset owners themselves.
“Engagement with the investor ecosystem has focused on mobilising asset managers as a channel for driving corporate action,” NZAOA explained, adding that it has been developing “increasingly systematic and robust approaches to ensure that asset managers fulfil their critical role in supporting signatories to manage their climate risks”.
It said this focus is expected to expand into private markets in the initiative’s next phase.
It also plans to phase in decarbonisation targets for the asset class under its target-setting protocol.
Asset allocation
While NZAOA members now channel 8% of their total assets under management into climate solutions, allocations are currently lowest in private markets.
More than 30% of the combined $743bn (€641bn) invested in climate solutions was done via listed equity portfolios, with a further 26% in corporate bonds. Private assets represented just 7%.
Due diligence
NZAOA’s update comes as the Principles for Responsible Investment (PRI) launched a supplementary climate module for its private equity due diligence questionnaire this week.
The module claims to offer a dedicated set of questions to help limited partners (LPs) better assess how private equity managers govern and manage climate-related risks and opportunities.
“The objective is simple: streamline and harmonise climate due diligence across the private equity market, enabling more consistent high-quality data, comparable insights, and free up capacity for LPs and GPs to focus on sustainability value creation,” the PRI said.
It urged LPs to adopt the module as a standard part of their due diligence process, and GPs to adopt it as part of their framework for collecting and providing data.
Progress among LPs and GPs
A survey of more than 100 GPs and LPs, published today, found that almost all private market investors now assess emissions as part of their due diligence process.
The research, conducted by Bain & Company, also found that just 28% of general partners have made net zero commitments, although three quarters of those claim to be on track or ahead of schedule when it comes to achieving them.
Despite the low uptake of targets, some 70% of those surveyed assign responsibility for their climate strategy to the board or C-suite.
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