- Less than 18 months since the initiative launched, 83 asset managers have set initial targets, with 39% of their assets (USD 16 trillion) now committed to be managed in line with achieving net zero by 2050 or sooner
- Most targets are from those who joined the initiative in March and April 2021, with some asset managers also disclosing early or updating their initial targets
- 53 asset managers have joined the initiative since November 2021, bringing the total to 273, representing more than USD 61.3 trillion in assets under management
- New signatories include T. Rowe Price, Credit Suisse Asset Management and Frontier Investment Management
43 asset managers have disclosed their initial targets for the proportion of assets managed in line with achieving net zero by 2050 or sooner, according to the latest Net Zero Asset Managers (NZAM) initiative target disclosure report. This follows the inaugural NZAM report published in November 2021.
The latest targets mean that, collectively, approximately USD 16 trillion – out of a possible USD 42 trillion managed by the asset managers who have set targets to date – is now committed to be managed in line with achieving net zero by 2050 or sooner, and subject to targets consistent with a fair share of the 50% global emission reduction by 2030 identified as necessary in the IPCC special report on global warming of 1.5°C. This sum represents approximately 39% of those managers’ assets – up from 35% when the first set of targets were published at COP26.
Some managers who had already set targets, including AXA Investment Managers and Wellington Management have demonstrated greater ambition by updating their initial targets from November 20211. Both AXA and Wellington have increased their targets for the proportion of assets managed in line with achieving net zero by 2050 or sooner – from 15% to 65% and 10.6% to 32.4% respectively.
Hiroshi Ozeki, President and Chief Executive Officer, Nissay Asset Management, said: “While the emergence of geopolitical risks, disruptions in global supply chains, and soaring energy prices may be regarded as obstacles to achieve a carbon neutral society, the race to maintain the sustainability of the planet can’t wait and we strongly believe that these changes should rather accelerate and encourage our actions toward net zero. Nissay Asset Management will continue to take actions toward net zero with a greater sense of urgency than ever before.”
Marco Morelli, Executive Chairman, AXA Investment Management, said: “Since our first submission in October, we have further intensified our efforts across the whole business to develop an approach which is robust and can be implemented in an effective manner by investment teams, meaning our revised figure now stands at 65% of total assets managed in line with net zero by 2050.”
“Announcements and decisions made by policy-makers in different locations to encourage the financial sector to continue to play a leading role in the transition, for instance Article 29 of the Law Energy-Climate in France, gave us more comfort on some of our points of attention in relation to assets outside of what we first deemed as eligible. We also moved from a bottom-up approach at fund level to a top-down approach at asset class level, specifically in relation to third party assets. Going forward, our aim is to continue to grow the proportion of net zero-aligned AUM as reliable methodologies become available for all asset classes.”
Wendy Cromwell, Vice Chair and head of sustainable investment at Wellington Management, said: “We are proud of our net zero commitment of $436 billion and the solid foundation we are building. We look forward to continuing to work with asset owners on their decarbonization goals, engaging with companies to assess preparedness for a low carbon transition, and serving on net zero related advisory boards and working groups to help enhance tools and methodologies. We plan to share periodic updates on our asset level commitment as our methodical client-by-client and strategy-by-strategy work continues.”
Throughout the target disclosure and review process, several notable themes were highlighted by a number of asset managers as key drivers behind the targets presented and the approaches taken to setting them.
One relates to the variation in business models owing to the difference in the number of clients across the different managers. While some have relatively few clients, other managers have thousands of different clients invested across hundreds of funds, which can make adjusting funds to align with net zero a lengthier process. However, many have indicated that there are ongoing conversations with clients and other stakeholders which they expect to result in significant increases in the proportion of AUM managed in line with net zero in future.
Another key theme managers highlighted was the difference between setting targets for actively and passively managed investments. While active managers have greater power to decide how the money is allocated, alignment of index funds requires a different approach and could take longer to achieve. Addressing these challenges will be an area of focus for NZAM network partners in the coming months, and they will be working collaboratively with key stakeholders across the sector to address them.
Other key themes noted include the differences in target-setting approaches – the three target setting methodologies endorsed by NZAM are the Paris Aligned Investment Initiative Net Zero Investment Framework, Science Based Target initiative for Financial Institutions and the UN-convened Net Zero Asset Owner Alliance Target Setting Protocol – and the importance of available methodologies across all asset classes, including derivatives, private equity, green bonds, sovereign bonds, covered bonds, structured products and cash. More information on the themes is available in the report.
As the importance of decarbonising the global economy has only increased – as highlighted by two recent IPCC reports – the momentum of the NZAM initiative has continued with 53 new signatories joining since November 2021. This takes the total to 273 representing more than USD 61.3 trillion in assets under management.
Rebecca Mikula-Wright, CEO, the Asia Investor Group on Climate Change (AIGCC) and the Investor Group on Climate Change (IGCC), said: “In the 18 months since NZAM launched, the world’s biggest asset managers have started on the journey of setting targets and getting their portfolios on track for net zero by 2050. This momentum must continue; climate is a risk that can’t be divested from, so investors will need to use their influence over capital flows, their influence on companies and their voice to policy-makers to speed up the transition to a net zero global economy.”
The Net Zero Asset Managers initiative is managed globally by six founding partner investor networks: Asia Investor Group on Climate Change (AIGCC), CDP, Ceres, Investor Group on Climate Change (IGCC), Institutional Investor Group on Climate Change (IIGCC) and Principles for Responsible Investment (PRI).
1 The NZAM commitment requires managers to review their target at least every five years and encourages them to do so more frequently where possible.