Thirty of the world’s largest asset owners, with portfolios worth a combined $5tn (GBP3.8tn), have committed to cutting the carbon emissions linked to companies they invest in by up to 29% within the next four years.
Members of the UN-backed Net-Zero Asset Owner Alliance – which includes Aviva, the Church of England and the $400bn US fund CalPERS – will each set decarbonisation targets for 2025 as part of wider efforts to align their portfolios with the Paris climate goals and achieve net-zero emissions by 2050.
Members will slash emissions linked to their portfolio companies by between 16% and 29%, compared with 2019 levels. They will also identify the top 20 emitters responsible for the bulk of their portfolio emissions and set goals for slashing emissions in key sectors including oil and gas, utilities, transport and steel.
However, the depth of the cuts will depend partly on the progress that asset owners have already made towards meeting Paris goals, the alliance explained.
The group – which also includes the BT pension scheme, the David Rockefeller Fund and Axa – is hoping to avoid divesting from polluting firms, and instead encourage companies to reduce their emissions and help limit global temperature rises to 1.5C. Some of that work will be achieved by pushing companies to supply mandatory climate reports and produce clear business transition plans.
Asset owners will set their individual targets in the first quarter of 2021.
“Alliance members are sounding a very loud signal to the thousands of companies they own that deep emissions cuts are required,” the group said in a statement.
The alliance plans to release an interim progress report each year, and is aiming to increase its membership to 200 or increase the collective assets under management to $25tn over the coming years.
The alliance’s chair, Gunther Thallinger, a board member of the financial services company Allianz, said: “Alliance members [will] start out by changing themselves and then reach out to various companies to work on the change of their businesses.
“Reaching net zero is not simply reducing emissions and carrying on with the business models of today. There are profound changes and opportunities that will come from the net-zero economy. We see new business opportunities and strong wins for those who are ready to lead.”
o The headline and text of this article were amended on 13 October 2020 to clarify that the members of the Net-Zero Asset Owner Alliance are asset owners rather than asset managers as originally stated