The investment industry is leading the world towards a net zero economy. It has been calculated that almost half the world’s assets under management are signing up to meet climate change goals in a shift marking huge implications ahead for the corporate world.
An initiative launched by investment firms in December 2020 is unifying the asset management industry towards net zero emissions by 2050. The initiative is called the Net Zero Asset Managers (NZAM) and represents an international group of asset managers committed to supporting the goal of eliminating greenhouse gas emissions by 2050 or sooner. It supports investing aligned with the emissions reduction goals.
Major asset management funds Amundi, Franklin Templeton, Sumitomo Mitsui Trust Asset Management and HSBC Asset Management are the latest to join the NZAM Initiative.
With their signatures, the total funds of the sector now committed to net zero carbon emissions come to $43 trillion – or nearly half of global assets. The investment industry is looking after $100 trillion worth of assets, according to data from Willis Towers Watson.
The number of investment funds part of the Net Zero Asset Managers initiative is also now 128. They pledge to cut emissions with near-term goals by 2030 across their investment portfolios. Furthermore, they commit to working with clients to cut 100% of emissions on their investments by 2050.
“This marks a fundamental tipping point across the investment sector and a significant boost in efforts to tackle climate change,” said Stephanie Pfeifer, chief executive of the Institutional Investors Group on Climate Change.
“We are convinced that the financial sector is a key catalyst for action in this race to net zero,” added Valérie Baudson, chief executive of Amundi.
Commitments Don’t Mean Action
However, serious actions towards those commitments remain questionable. Lara Cuvelier – a sustainable investment campaigner at Reclaim Finance, claims that many of the pledges from asset managers “seem more zero action than net zero emissions”.
According to recent research involving 29 large asset managers, just two of them had robust policies set in place around issues such as the phasing out of coal. The Net-Zero Asset Owner Alliance – an international group of institutional investors delivering no emissions targets convened by the UN – calls for radical reform in global carbon pricing to force companies to act towards their net zero pledges.
According to some recent analysis, investors failing to include carbon pricing and climate change mitigation in valuations could see deep plunges in their investments.
The increasing focus on climate from the asset management industry is pointing to the high demand from the finance sector towards sustainability and green solutions. Not including issues like global warming mitigation in investment decision-making is a thing of the past in today’s fast-changing financial climate.