Assets managers unite over climate change threat; To target net-zero emission by 2050

Darren Sinden

Concerns about ESG and climate change seem to be building among money managers, to date their efforts to affect change have largely been discrete and have taken place behind the scenes.

Factory Europe

In a commitment toward a lower carbon world, 30 global assets managers have announced the launch of the net-zero asset manager initiative.

Between them, the managers control around $9.0 trillion of assets and the list of signatories contains some very well known names, such as Schroders, Legal and General, AXA Investment Managers, UBS Asset Management, Robeco and Fidelity.

The group have committed to achieving a series of targets and their main objectives are as follows:

  • To work in partnership with asset owning clients on decarbonisation to achieve net-zero carbon emissions by 2050, or sooner, for all assets under the group’s management.
  • Set interim targets for the proportion of assets under management to be managed in line with objective one and to review those interim targets at least once every five years, and to raise those thresholds to meet the net-zero 2050 targets.

Speaking about the net-zero asset manager initiative the CEO of Fidelity International Anne Richards said that her firm “recognised that climate change posed one of the (most) significant risks to profitability and sustainability in business.”

The net-zero initiative will be managed on a global basis by six founding partner investors networks, all of which have a focus on ESG and sustainability.

The group has been founded to tie in with the fifth anniversary of the Paris climate agreement and other asset managers are expected to sign up in the coming weeks.

Signatories signed up to a 10 point pledge which includes items such as:

  • Prioritising the achievement of real economy emissions reductions within the sectors and companies in which we invest and as required, create investment products aligned with net-zero emissions by 2050 and facilitate increased investment in climate solutions.
  • Engaging with actors key to the investment system including credit rating agencies, auditors, stock exchanges, proxy advisers, investment consultants, and data and service providers to ensure that products and services available to investors are consistent to achieve global net-zero emissions by 2050 or sooner.
  • Implementing a stewardship and engagement strategy, with a clear escalation and voting policy, that is consistent with our ambition for all assets under management to achieve net-zero emissions by 2050 or sooner.

Thus, its seems as though the initiative will involve an element of activism on the part of the asset managers.

Indeed just last week Legal and General, one of the founding signatories of the new initiative, announced that it would look to halve the emissions of the investments in its £81 billion pension portfolio by 2030.

Separately the worlds largest fund manager BlackRock said that it would be targeting 100 companies over their current emissions, and New York sates $226 billion pension fund said that it was intending to divest from oil and gas stocks in the years ahead.

Concerns about ESG and climate change seem to be building among money managers, to date their efforts to affect change have largely been discrete and have taken place behind the scenes.

However, it can’t be long before they take more explicit action, either by using their votes or by declining to fund a venture or proposal. Financial markets and quoted businesses would do well to take note.

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