The Net-Zero Asset Owners Alliance’s (NZAOA) fourth annual Progress Report shows significant efforts have been made toward net-zero commitments, with members having reduced their absolute financed emissions by at least 6% on average annually.
Members representing 98.9% of the Alliance’s total assets under management (AUM) have now set Paris-aligned 2025 decarbonisation targets, using the four-pronged framework set out in the Alliance’s Target-Setting Protocol, which requires them to set an engagement target and at least two out of three of either sub-portfolio, sector or climate solution investment targets.
The 12 new members that have set targets for the first time in 2024 have all set both sub-portfolio and climate solution investments targets, together with mandatory engagement targets. With the addition of new members, a total of 79 asset owners have chosen to set sub-portfolio targets.
Target-setting methodologies for sub-portfolio targets cover almost half (48%), or $4.3trn of members’ total AUM. Portfolio coverage is up from 42% in the previous year. For NZAOA, this demonstrates the “growing robustness” of the latest and most comprehensive protocol.
Sub-portfolio target coverage is expected to increase further once recently added private assets are phased in.
Additionally, on average, members targeted a reduction of 26% by 2025 for bonds, equities, real estate and infrastructure. These reductions are reportedly aligned with the Paris Agreement and the IPCC Sixth Assessment Report pathways for achieving net zero greenhouse gas emissions by 2050.
Wendy Walford, head of climate risk at Legal & General, and policy track co-lead, NZAOA, said: “Despite significant advances in asset owner portfolio decarbonisation, the pace of transition in the real economy remains insufficient, with global emissions continuing to rise each year.
“As long-term investors, we see the difference between governments’ climate commitments and current policies as unsustainable, and a decisive shift in policy is required to align policy frameworks with the net-zero transition more widely. Governments have the tools – such as carbon pricing – to meet their Nationally Determined Contributions, as highlighted in the Alliance’s white paper earlier this year.”
