Investment industry at ‘tipping point’ as $ 43 billion in funds pledge to net zero

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The investment industry has reached a ‘point of no return’, with nearly half of the world’s assets under management now committed to meeting climate change targets in a change that could have huge implications for the economy. businesses.

Amundi, Franklin Templeton, Sumitomo Mitsui Trust Asset Management and HSBC Asset Management are among the latest large investors to join the Net Zero Asset Managers initiative launched last December.

The latest signatories mean that $ 43 billion in assets, nearly half of the world’s asset management industry in terms of total funds under management, are committed to a goal of net zero emissions. The industry oversees $ 100 billion in assets, according to data from Willis Towers Watson.

“This marks a fundamental turning point in the investment industry and a significant boost in efforts to tackle climate change,” said Stephanie Pfeifer, managing director of the Institutional Investors Group on Climate Change, one of the networks investors who brought together asset managers.

The focus by fund managers on net zero goals will have ramifications as investors are forced to seek cleaner investments to meet their climate goals.

“We are convinced that the financial sector is a key catalyst for action in this race for net zero,” said Valérie Baudson, CEO of Amundi.

Catherine Howarth, chief executive of responsible investment charity ShareAction, said it was “very welcome” that asset managers recognize the need to cut emissions.

“But pledges are the easy part. They must be supported by vigorous engagement with the many major emitters in the lagging business community. ”

A total of 128 investors are now part of the Net Zero Asset Managers initiative, up from just 30 with $ 9 billion in assets in December. The signatories have committed to setting short-term emission reduction targets across their investment portfolios for 2030. They will also work with clients who choose to achieve net zero on their investments by 2050 .

Investors are expected to report their exposure based on recommendations from the Climate-Related Financial Disclosures Task Force (TCFD), a framework backed by former Bank of England Governor Mark Carney.

By doing their net zero calculations, they can include carbon offsets that involve long-term carbon removal only when there are no technologically or financially viable alternatives to removing the emissions.

Video: The net-zero trend in the corporate world

But Lara Cuvelier, activist for sustainable investing at Reclaim Finance, said that many of the recent commitments by asset managers “seem more zero shares than zero net emissions.”

She said the group recent research in 29 major asset managers found that while many made long-term climate commitments, only two had strong policies around issues such as phasing out coal.

The climate focus by asset managers coincides with the growing demand from asset owners for investments that take into account environmental, social and governance issues.

In a document released Friday, the UN-convened Net-Zero Asset Owner Alliance, which oversees $ 6.6 billion in assets, also called for sweeping reform of global carbon pricing as part of the push. He argues for the introduction of a mechanism that creates a global price floor and ceiling for carbon that increases over time.

A carbon pricing mechanism would trigger the “massive investments” required by all industries to reduce carbon emissions, he argued.

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