Twelve further asset owners have committed to transition to net-zero emission portfolios by 2050, using a framework developed under the auspices of the Institutional Investors Group on Climate Change (IIGCC).
The new signatories of the Paris Aligned Investment Initiative (PAII) Net-Zero Asset Owner Commitment are Hesta, London Pensions Fund Authority (LPFA), Railpen, Tesco Pension Investment, AP Pension, AP3, AP7, the Church Pension Fund, Elo Mutual Pension Insurance Company, Ilmarinen, Lægernes Pension and PenSam.
The IIGCC-maintained Paris-Aligned Asset Owners Group now counts 40 members, after ABP and five others joined in June.
Chresten Dengsøe, chief executive officer of Lægernes Pension, said becoming a signatory was “a natural next step in achieving our goal of a net-zero portfolio by 2050 or sooner”.
Robert Branagh, CEO of the LPFA, said that working with its delegated asset manager, Local Pensions Partnerships Investments (LPPI), LPFA would be developing its net zero action plan over the coming 12 months. LPPI today announced a net-zero commitment of its own.
Asset owners making the PAII commitment will be using the initiative’s Net Zero Investment Framework as a blueprint for aligning their portfolios with a 1.5°C net zero emissions future.
The framework currently covers four asset classes, with work on other asset classes underway. Uptake of the framework can indicate a new or enhanced commitment to net-zero.
Ruston Smith, chair of Tesco plc pension scheme, said becoming a signatory to the PAII’s net-zero asset owner commitment was “a clear indication” of the scheme’s aim to address the financial risk and opportunity represented by climate change, “including through the investment in sustainable businesses to support a greener world”.
Smith was one of more than a dozen UK pension scheme trustee chairs to have issued a net-zero “statement of support” in July.
Stephanie Pfeifer, CEO of the IIGCC, said the asset owners’ net-zero commitments were “incredibly important, and the first step on the path towards investors putting in place a net zero investment strategy”.
“We look forward to working with these asset owners on their net zero strategies and would welcome other climate-conscious asset owners to consider becoming signatories to the Paris Aligned Asset Owners commitment.”
Pension funds call for net-zero accounting disclosures
Asset owners including AP2, the Environment Agency Pension Fund, and P+ and nine other institutional investors have written to Alok Sharma, the UK politician serving as president of COP26, to request support for a call for governments to set a timeline for mandatory net-zero accounting.
Their letter, which builds on corrrespondence with Sharma in March, also calls for auditors to be required to ensure they call out companies that fail to produce accounts that consider the global transition to a 1.5°C pathway.
The letter refers Sharma to a position paper setting out global investors’ call for net zero-aligned accounting and research showing that the vast majority of companies make little or no reference to climate-related matters in their financial statements.
The signatory investors write that “if we choose to wait for companies to respond to investor pressure, it could take years to deliver the numbers we require to invest in a way that is aligned with the Paris goals”.
Natasha Landell-Mills, head of stewardship at Sarasin & Partners, a key advocate of net-zero acounting, said companies’ financial statements must be aligned with a 1.5°C-pathway to deliver on the Paris Agreement call for “finance flows consistent with the pathways towards (…) climate-resilient development”.
She said that based on current scientific understanding, this meant companies’ accounts should consider the global transition towards net-zero greenhouse gas emissions by 2050.
“Likewise, for governments that have committed to achieve net-zero emissions by 2050, net-zero aligned accounting is an essential policy lever without which efforts to redirect private capital flows will be severely hampered.”
The investors have invited Sharma to share his reactions to their letter and the position paper.
Asset owner sovereign bond project takes next step
Convenors of an investor project focussed on analysing governments’ climate change governance and performance have announced the formation of an advisory group, and a Latin American member of the steering committee.
Aktia Bank, Amundi, Colchester Global Investors, Franklin Templeton, MFS Investment Management, Ninety One and Wells Fargo Asset Management have joined the Assessing Sovereign Climate-related Opportunities and Risk (ASCOR) project as members of an advisory committee.
SURA Asset Management, described as Latin America’s largest pension fund provider, has joined the project steering committee.
ASCOR was set up by BT Pension Scheme and the Church Of England Pensions Board with the support of bodies such as the UN-convened Net-Zero Asset Owner Alliance and the Principles for Responsible Investment.
It aims to develop a tool to allow investors to “fairly and appropriately” measure, monitor and compare the current and future climate change governance and performance of sovereigns.
“The members of our advisory committee, along with SURA Asset Management, provide us with a deep knowledge of sovereign assessment processes, and importantly, with perspectives and insights from all of the world’s major investment markets,” said Victoria Barron, chair of ASCOR and head of sustainable investment at BT Pension Scheme Management.
“They will help ensure that we develop a tool that is relevant to asset owners and managers, of all sizes and across all markets.”