Investor Group Representing $5T AUM Commits to 2025 Portfolio Decarbonization Targets
The UN-convened Net-Zero Asset Owner Alliance, an international group of 30 institutional investors representing $5 trillion in assets under management, announced today a collective commitment to five-year portfolio decarbonization targets that align with the Intergovernmental Panel on Climate Change (IPCC) 1.5 °C scenario. The investor group has outlined the plan for reducing portfolio emissions in the newly published 2025 Target Setting Protocol.
The Alliance was founded as a joint initiative of the United Nations Environment Programme Finance Initiative (UNEP FI) and the Principles for Responsible Investment (PRI). UNEP FI stated that under the new initiative, alliance members will implement deep greenhouse gas (GHG) emissions reductions in the 16% to 29% range by 2025 from a 2019 base. According to UNEP FI, the new protocol should serve as “a very loud signal to the thousands” of the investors’ portfolio companies that emissions reductions will be required in order to continue attracting capital from investors.
Eric Usher, Head of UNEP FI, said:
“According to the UNEP Emissions Gap Report, every year of postponed emissions peak means that deeper and faster cuts will be required. The Target-Setting Protocol represents world-leading progress on the required emissions reductions from some of the biggest investors in the world.”
According to the Alliance, individual members will set their own portfolio targets in Q1 2021, the level of carbon emissions currently contained within their portfolios. Alliance members will employ a combination of approaches that best supports their unique decarbonisation and engagement strategies and their current carbon levels.
Ultimately, Alliance members have committed to transitioning investment portfolios to net-zero GHG emissions by 2050, and aim to achieve this goal through engagement on corporate action and public policies, while also considering implications for a just transition.
Günther Thallinger, Alliance Chair and Member of the Board of Management, Allianz SE, said:
“Alliance members 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.”
Fiona Reynolds, CEO of PRI, added:
“Establishing firm interim portfolio decarbonization targets is key to meeting the Paris climate commitments. From a membership of 12 asset owners at launch over a year ago, to 30 and counting, means the UN-convened Net-Zero Asset Owner Alliance, a joint initiative of the PRI and UNEP FI, can have a huge impact on the way companies manage the carbon footprint of their operations.”