Why the net zero commitments of asset managers are not appropriate


The net zero commitments of asset management companies are well below what is required on decarbonization targets.

It is according to the Miss the target Universal Owner Climate and Investment Think Tank Report.

The report found that on average, Net Zero Asset Manager Initiative (NZAMI) signatories have only committed to reducing well below 20% of their emissions by 2030.

Louise Fletcher, senior researcher at Universal Owner, said that number is lower than the 50% reduction in global emissions that the IPCC and climate science tell us we need to achieve.

“At worst, most asset managers will be able to technically meet their targets while reducing only a few percent of their total emissions,” Fletcher said.

Universal Owner said that members of the initiative are allowed to choose the percentage of their assets under management covered, with figures ranging from 0.55% to 100% of their assets under management.

“The combination of these AUM percentages, with the reduction in emissions that asset managers” are committed to achieving on these assets, reveals that the initiative’s average effective decarbonization target is only 20. %, “the think tank added.

Access all areas

Universal Owner said current figures assume that the assets covered by the targets match the emissions profile of all of the asset managers’ assets.

However, there is no guarantee that this will be achieved as a small minority of companies in carbon-intensive sectors account for the vast majority of emissions.

The think tank looked at the stock holdings of BlackRock, Vanguard, State Street, Allianz and LGIM and compared them to emissions data.

“We found that 10% of their operations were responsible for 85% of all emissions in their portfolio. It follows that even a target covering 90% of assets under management may not cover up to 85% of all emissions.

“Only targets covering 100% of assets under management avoid creating this loophole, but only 13 of the 43 asset managers who published targets on November 1 meet this criterion,” said Universal Owner.

Universal Owner said NZAMI signatories should monitor companies’ internal investment decisions, engage members to reduce the supply of primary capital to misaligned companies, and encourage aggressive management with increasing penalties for laggards.

“One of the biggest impacting steps the initiative could take would be to launch a joint program to reconnect index investing, while its members can make Paris-aligned index funds its default offering to clients,” said the think tank.

Lack of responsibility

Universal Owner is not the only organization to criticize the commitment of asset managers. ShareAction pointed out that net zero goals vary widely between different members of the initiative.

The NGO found that 11 members committed 100% of their assets to this goal, while others committed a tiny fraction of their assets. He cited GIB Asset Management, for example, which has pledged just 1.26% of its assets to be aligned with net zero by 2050.

Peter Uhlenbruch, Director of Financial Sector Standards at ShareAction, said: “The NZAM progress report is a step in the right direction, and it is positive to see more granularity around the initial disclosures from signatories.

“However, an average signatory commitment to manage only 35% of assets under management in line with net zero does not signal the level of ambition demanded by the net zero revolution, especially given the flexible choice of methodologies available. ”

ShareAction also highlighted the need for the initiative to increase the frequency of target reviews, which are currently required every five years, urging them to mandate annual reviews.

ShareAction also pointed out the initiative’s weak accountability mechanisms, such as delisting members if they do not disclose goals or report progress.

Another pressure point is the initiative that does not pressure members to implement net zero stewardship policies.

“This is a concern because strong management – including escalation and voting – is vital if asset managers and their issuers are to achieve net zero goals,” ShareAction said.

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