Investment managers need to ensure their net-zero pledges are being taken up by senior leadership or they will start losing out on mandates, asset owners have warned.

Speaking to IPE, Patrick Peura, an ESG engagement manager for insurer Allianz, said that investors’ commitments to reach net zero “cannot be achieved by stewardship teams alone”.

Peura co-leads engagement on behalf of the Net Zero Asset Owner Alliance (NZAOA), a group of 88 pension funds, foundations, endowments and insurers that have promised to have net-zero portfolios by 2050.

He noted that those commitments are signed off by those at the very top levels of asset owner institutions.

“We need to see that same conviction at asset managers, and right now I’m not sure it’s always there,” Peura continued. “There are still some stewardship teams sitting in the corner, struggling to fight the good fight, while senior leadership fails to integrate their climate objectives into their broader business strategy.” 

The comments came as NZAOA doubled down on its expectations from asset managers today by publishing a ‘call to action’.

The document reiterates the Alliance’s belief that managers should move to “outcomes-focused” corporate engagement, including sector-specific efforts, and engagement with value chains and policymakers.

Patrick Peura at Allianz

Patrick Peura at Allianz

They should implement transparent, consistent and “merit-based” proxy voting policies when running public equities, and align their lobbying activities with their net-zero commitments.

Members of NZAOA will ramp up their outreach with managers over the coming year on these issues, which are being framed as important considerations for future management selection.

Jake Barnett, managing director of sustainable investment strategies at Faith-based US pension fund Westpath, said it was “important that asset owners speak to managers about what we think it looks like for them to represent our long-term interest”.

He added that, if asset managers are serious about their net-zero promises, “they should be willing to work out what a new organisational structure needs to look like in order for them to deliver on them”.

Some asset managers are frustrated by the growing pressure to dedicate hefty amounts of time and resources to sustainability issues without asset owners being prepared to pay higher fees.

But Peura and Barnett suggested that introducing institution-wide processes and policies on climate change would ultimately make asset managers more efficient than doing it on an ad-hoc, product-level basis.

“If you’ve made a commitment to be a net-zero asset manager and you look at this and decide it’s too resource-intensive, then there’s room for you to walk back from that commitment,” said Barnett. “And then asset owners can take that into account when they’re awarding mandates.”

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