In a first round of early disclosures for COP26, 43 signatories of the Net Zero Asset Managers Initiative (NZAMI) have declared the initial proportion of their assets under management that they will manage in line with net-zero emissions, with this on average amounting to 35%.
The disclosures would normally only have had to be made within 12 months of signing on to the initiative, by when signatories are also required to disclose interim targets consistent with a “fair share” of a 50% global reduction in greenhouse gas emissions by 2030, for the assets under management that will initially be managed in line with the goal of net-zero emissions by 2050.
The expectation is that signatories increase the proportion of assets to be managed in line with net-zero until 100% are included.
According to the NZAMI organisers, 15 signatories set shorter-term targets for 2025 and 11 were already able to commit 100% of their AUM.
Generally smaller asset managers and those specialising in sustainable investment were able to include a higher proportion of AUM initially, they said, and the percentage of AUM committed initially also varied depending on the business model, asset class mix, and maturity of strategies, data and tools available to asset managers.
In the initiative’s first progress report, the coordinating organisations also reported that the majority of the 43 disclosing signatories (23) applied the target-setting methodology developed by the Paris Aligned Investment Initiative, which is one of three such methodologies endorsed for use within NZAMI.
The co-ordinators also relayed that asset managers identified data quality and availability, an evolving regulatory environment, and the absence of methodologies for certain types of asset as factors “precipitating their conservative approach” to the proportion of AUM they initially committed to managing in line with net-zero emissions by 2050.
Wellington Management, a founding signatory of the NZAMI, has initially committed 10.6% of its AUM to be managed in line with net zero, saying it intended to update its commitment as it reached ”AUM milestones”, such as when it established actionable climate plans for a new asset class and/or received incremental client approvals.
It also said the 10.6% represented nearly 30% of AUM that it currently considered to be eligible for net-zero implementation.
“We are pleased to report our initial commitment of net-zero-aligned assets and are excited about the solid foundation we have built for further progress,” said Jean Hynes, Wellington Management’s CEO.
”We plan to continue to develop measurable net-zero implementation plans client by client, and investment strategy by investment strategy. As a large active manager we believe we have an important role to play in helping companies prepare for this significant economic transition.”
New members, new fossil fuel expectations
Launched in December 2020, the NZAMI now counts 220 investors managing $57.4trn in assets under management – 92 new signatories were announced today. According to the convenors, the new joiners significantly boost the representation of Asian and US-based managers within the initiative.
The NZAMI is managed globally by six founding partner investor networks, including the Institutional Investor Group on Climate Change (IIGCC) and the Principles for Responsible Investment.
They said they also published today a set of expectations for investors in relation to fossil fuel investment. Their position is that signatories should adopt a science-based policy on investment in fossil fuels for the organisation as a whole and that in relation to the assets under management they have committed to manage in line with net zero, the policy should be consistent with one of the positions of the NZAM-affiliated organisations, such as the Net-Zero Asset Owners Alliance or the Science Based Targets initiative.
“It has been remarkable to see the level of commitment coming from the global asset management community when it comes to tackling climate change and decarbonising the global economy,” said Stephanie Pfeifer, CEO of the IIGCC.
“We continue to see a significant number of investors making net zero commitments, but importantly are now also seeing action on those commitments as asset managers begin to share their targets. However, there is still work to do if we are to meet the goals of the Paris Agreement. I look forward to seeing these targets put into action and would encourage the investors who will be disclosing over the coming months to match – or exceed – the ambition set out by the first wave of signatories.”
Campaign group Reclaim Finance said the new expectation on fossil fuel phase-out policies were a step in the right direction, but that the guidelines “do not prevent assets from driving the expansion of fossil fuel, even coal” and that no timeline was set for members to adopt such policies.
The full NZAMI progress report can be found here. It follows the inaugural such report of the Net-Zero Asset Owners Alliance.