Asset owners commit $7.1trn to interim net-zero targets

AUM applying to sub-portfolio goals more than doubles to $3.3trn

Two-thirds, or $7.1trn, of assets managed by members of the UN-convened Net-Zero Asset Owner Alliance (NZAOA) is now committed to 2025 and 2030 targets.

NZAOA is a global group of institutional investors committed to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050, consistent with a maximum temperature rise of 1.5°C.

The total has come from 44 members, up from 29 members committing to interim targets in 2021.

All 74 members of the alliance, representing $10.6trn in assets under management (AUM), have committed to be net zero by 2050. AUM has quadrupled since the alliance’s inception in 2019.

The number of firms that have set sub-portfolio targets is now 41 – applying to $3.3trn total AUM – up from $1.5trn last year.

Sub-portfolio targets are commitments to decarbonise by asset classes, including listed equity, corporate bonds and real estate.

Members that have set sub-portfolio targets, including Dai-Ichi Life, Prudential, Nippon and Meiji Yasuda, have committed to reduce total portfolio emissions across the four asset classes by at least 22% by 2025 or by at least 49% by 2030.

Target setting

The alliance has four sections to its target-setting approach: sub-portfolio targets, sector targets, engagement targets and financing transition targets.

Assets committed to financing transition targets have increased by nearly three times to a total of $253bn this year. These investments are directed to climate solutions like clean technologies and green infrastructure.

NZAOA members must follow strict target-setting and reporting guidance including setting intermediate targets 12 months after joining.

Günther Thallinger, chair of NZAOA, said: “The members of the alliance are holding themselves to account through concrete, near-term, science-based climate targets, and putting themselves in a strong position to benefit from the vast opportunities in climate-related investments.

“We hope this will encourage more asset owners to join us in aligning their portfolios with a pathway that keeps global warming to 1.5°C. We need investors from all corners of the world to act at scale, at pace and together with national governments to make this the decade of transition despite the many other crises affecting the global economy.”

As well as publishing a progress report on members’ targets, the alliance has published a call to action for companies – including those in cement, steel and oil and gas – to publish forward-looking sectoral targets. According to a statement from the alliance, addressing the “sectoral data deficit in the real economy” would help increase the number of members setting sector targets. Currently 20% have them in place for 2025.

Capitalising on COP27

Ahead of COP27, the alliance set out five key changes it wants to see from policymakers:

  • Deliver enhanced nationally determined contributions with stronger ambition and details for implementation.
    • Ensure 2030 targets are aligned with the global goal of limiting temperature rise to 1.5°C and review and reset intermediate targets every five years.
  • Implement long-term domestic policies that enable a just transition towards a net-zero emissions economy.
    • In its Governmental Carbon Pricing position paper, the Alliance argues for a well-designed carbon pricing system in line with a just transition.
  • Continue to reform existing finance and investment policy frameworks so that they direct investment towards net-zero goals, ensuring long-term policy clarity and direction.
    • This includes prioritising the mandating of climate-related financial disclosures for companies.
  • Address the urgent needs of emerging market and developing economies (EMDEs) for adaptation and resilience.
    • Scale up blended finance vehicles targeting investments in EMDEs for the transition of the real-economy.
  • Enhance the necessary institutional arrangements and capacity to advance monitoring, reporting, review, and enforcement of effective policy implementation.
    • This includes dedicating independent climate change bodies with mandates to steer and coordinate climate policy.

Thallinger said COP27 talks are “a significant opportunity to lay the financial infrastructure that can more rapidly transition the economy to net-zero”.