ESG InvestingFeb 2 2022

Asset owners pledge to slash emissions

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Asset owners pledge to slash emissions
Reuters/Stringer

A group of asset owners have committed to halving the emissions in their portfolios by 2030.

The Net-Zero Asset Owner Alliance, which has 69 members including St James’s Place and Legal & General, released the second edition of its target setting protocol last week (January 25), an update on the original protocol released in January 2021.

In the updated version, the group said its members will look to reduce overall absolute emissions by 49 per cent to 65 per cent in the eight years to 2030.

The document has been expanded to cover infrastructure equity and debt, alongside sectors included in the original protocol which were listed equity, publicly traded corporate bonds and real estate assets.

The scope has also been extended to include new sectors such as agriculture, chemicals, water and concrete and aluminium production.

The alliance recommends that members set emissions reductions targets in carbon-intensive sectors and in firms where they have more than 20 per cent ownership or a board seat.

Guenther Thallinger, chairman of the alliance and a board member at Allianz SE, said the advanced guidance will help investors who are already committed to net zero to take the "urgent" shorter-term action that climate science demands.

He added: “Action is needed now, and every company is challenged to follow the lead of alliance members and adjust business models, develop plans for the transition to a low-carbon, climate-resilient future, and then implement those plans."

The alliance requires members to publish interim targets on a five-year cycle, including targets for engagement, sector, sub-portfolio and financing transition.

Caroline Clarke, commercial director of financial services at Carbon Intelligence, said the expansion of asset classes will be useful to asset managers and owners who have often been ‘baffled’ as to how to approach their de-carbonisation.

“What is perhaps most encouraging about this protocol is a clear alignment between the expectations and actions at the asset owner level filtering through to what is being asked of asset managers and their investee companies," she said.

“All of these groups are grappling with more incoming regulation and frameworks as well as greater scrutiny, so consistency is vital. Moreover, this harmonisation of approach across all market participants is key to creating rapid real-world emissions reductions.”

Last week (January 24), the chief executive of Aviva Investors, a member of the alliance, warned it will take action against company directors if they do not meet its expectations on sustainability improvements.

In a letter sent to 1,500 companies in which Aviva Investors is invested, Mark Versey said the fund house would focus on their performances against four themes: biodiversity, human rights, climate and executive pay.

He said the company would hold both boards and individual directors accountable at companies "where the pace of change on climate, biodiversity and human rights does not exhibit sufficient urgency".

Last year a charity criticised the UK asset management industry, saying it was "failing" to resolve the vast majority of social and environmental issues in the companies they were invested in.

Data from ShareAction showed that of a selection of 169 shareholder proposals, only 21 per cent of environmental and social resolutions had received more than 50 per cent of shareholder support.

sally.hickey@ft.com