UK consultancy LCP is calling on investment managers to focus on real world emission reductions to meet net zero 2050 targets.
The firm has increased expectations on investment managers when it comes to climate change goals, and now asks investment managers to help mitigate systemic climate risk and not just focus on risks to individual assets.
LCP said it believes its clients should be actively advocating for changes to government policy, financial markets and to companies that increase the chances of reaching net zero global emissions no later than 2050.
That means engaging with companies, leaseholders and other stakeholders to get real emission reductions, as well as seeking profitable investments in companies or other assets that assist with emissions reduction or removal.
Additionally, LCP expects that investment managers should be doing this alongside aligning portfolios with net zero pathways, as well as encouraging portfolio companies, or other investee entities, to set and meet net zero targets.
Aaron Punwani, LCP chief executive officer, said: “Climate risk is financial risk and at LCP, we firmly believe that limiting global average temperature rises to 1.5°C is in the best interests of our clients, our industry and our collective future.”
He added: “To get there we need to achieve net zero global greenhouse gas emissions no later than 2050. Investment managers need to be actively engaging with companies and helping them to align with net zero goals. Simply selling off portfolio assets that are emissions heavy will only serve to kick the can down the road and won’t help real world emission reduction.”
This latest move comes after managers were required by LCP since April 2022 to be signatories of the Net Zero Asset Managers initiative for their products to be eligible for LCP to give them the highest rating.
Last year, LCP launched a tool to help all pension scheme stakeholders better understand and engage with sponsor-related climate risk. While urging its trustees to better understand their sponsor’s net zero strategy, along with integrated ESG factors into broader covenant assessment and journey planning strategies.