- Daily Zen
The investors who signed net zero carbon pledge have committed to prioritizing the achievement of real economy emissions reductions.
Thirty leading asset managers of the world have committed to oversee $9 trillion in investments to achieve net-zero carbon emission portfolio by 2050.
The group includes Fidelity International, Legal & General Investment Management, Schroders, UBS Asset Management, M&G, Wellington Management and DWS. This decision is sure to impact many businesses as the portfolio managers will be looking at companies that are committed to lessening their carbon footprints.
The investors also include Japan’s Asset Management One and France’s Axa Investment Managers. The group has come forward to form the Net Zero Asset Managers initiative to mark the five-year anniversary of the Paris Agreement.
The investors have agreed to set an interim target, meanwhile, to cut their investments in line with achieving net zero emissions by 2050 or sooner. The targets will be reviewed every five years.
“The transition to net zero will be the biggest transformation in economic history and we want to send a clear signal that there is simply no more time to waste,” said David Blood, who co-founded Generation Investment Management with former US vice-president Al Gore. “The opportunities to allocate capital to this transition over the coming years cannot be underestimated. Without the asset management industry on board, the goals set out in the Paris Agreement will be difficult to meet.”
The move is prudent and in consonance with the world’s shift to more responsible business decisions. The spate of natural disasters and calamities that have hit the world, along with the pandemic, has raised red flags about the unchecked exploitation of the earth’s resources. Added to that is the unchecked use of fossil fuels and related activities which have added to global warming.
Asset managers have become increasingly concerned about the risks of climate change to financial returns. Closer scrutiny by activist groups about the ramifications of continual investments in carbon intensive industries has added to the pressure. “Climate change poses one of, if not the most, significant risks to the long-term proﬁtability and sustainability of companies, including our own,” said Anne Richards, chief executive of Fidelity International.
Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change and founding partner of the initiative, said the scale and significance of the asset managers joining the group was a “clear signal” that the “financial firepower” of institutional investors will be “committed to making real progress towards a net zero and resilient future”.
But there are some skeptics in the group too. Lucie Pinson, founder and director of Reclaim Finance, a non-profit organization, believes that many of the members are not fully committed to the transition. Some of the asset managers had very weak policies on fossil fuels such as coal. “We remain sceptical,” she added.
Some are of the opinion that the move is a green wash and more needs to be done. Colin Baines, investment engagement manager at Friends Provident Foundation, said the adoption of net-zero targets by large asset managers “accompanied by meaningful and clear transition plans and milestones could affect real change across the global economy”.
“This is a welcome step from the asset-management community,” said Peter Uhlenbruch, head of investor standards at ShareAction in London. “But the real test will be how quickly signatories translate ambition into action by escalating their engagement with companies.”
The United Nations run pension funds and insurers have also pledged to erase the carbon footprint of their investments. The Net-Zero Asset Owner Alliance made up of Allianz SE and the California Public Employees’ Retirement System, said that its members will reduce the emissions of their equity, corporate bond and real estate investments by 16% to 29% from 2019 levels by 2025.
JPMorgan and HSBC have both come forward to expand investment in clean energy and work towards net zero emissions by 2050, in line with the Paris climate pact. HSBC said its ambition is to support customers with between $750 billion and $1 trillion of finance and investment by 2030 to help with their transition to zero emission technologies.