Some of Europe’s largest money managers pledged on Friday to make their investment portfolios reach net-zero greenhouse-gas emissions by 2050.
The group of 30 signatories represent more than $9 trillion in assets and include Bank of Montreal Global Asset Management, Wellington Management in North America, Asset Management One in Japan, AXA Investment Managers, Legal & General Investment Management and UBS Asset Management.
As part of the commitment, the group of signatories, called the Net Zero Asset Managers Initiative, said it would work with clients on these goals and set interim targets in line with achieving net-zero emissions by 2050 or sooner. These targets will have to be set within the next year and reviewed every five years, with the aim to have all of the group’s assets under management eventually included, the group said in a statement.
The pledge is the latest effort by asset managers, including asset management firm
BlackRock Inc.,
to encourage companies they invest in for their clients to meet higher environmental standards. BlackRock, however, hasn’t signed onto this initiative.
Many of the recent green commitments haven’t specified consequences for companies that don’t meet the emissions targets.
The group of asset managers said divesting from companies would be a last resort.
“We want to engage with the companies that we invest in, to ensure that they’re creating these targets, rather than focusing only on divestment, which would decarbonize our portfolios, but not decarbonize the real economy, and then, therefore, our portfolios would still be subject to the worst effects of physical climate change,” said
Wendy Cromwell,
vice chair and director for sustainable investment at Wellington Management, at a press conference.
The 30 asset managers committed to using their shareholder voting and lobbying power to place more pressure on the companies in their portfolios to take climate action.
Investors are increasingly using their proxy voting rights to pressure companies to take action. During the 2020 proxy season, shareholder support for climate-change disclosures from U.S. companies averaged at 40%, up from 26% in 2016, according to fund tracker
Morningstar.
The number of investors committing to net zero is also expected to grow considerably next year, U.K. bank
Barclays
says.
The asset managers have also committed to creating new investment products in line with the net-zero emissions goal.
“This is a welcome step from the asset-management community, which we hope will inspire all managers to ratchet up their climate-related ambitions,” said
Peter Uhlenbruch,
head of investor standards at ShareAction, a responsible-investment nonprofit.
He said the real test will be “how quickly signatories translate ambition into action by escalating their engagement with companies.”
The asset managers said they would publish annual progress reports and disclose in line with recommendations from the Task Force on Climate-related Financial Disclosures, an organization chaired by former New York City Mayor
Michael Bloomberg
that provides a framework for companies to report climate-change risks.
The number of listed companies with a net-zero pledge has tripled over the past year from 500 in late 2019, according to research by Data-Driven EnviroLab and the NewClimate Institute. Big corporations such as
Apple Inc.,
Microsoft Corp.
and
Amazon.com Inc.,
and companies in emissions-intensive industries like oil major
Royal Dutch Shell,
have recently announced greenhouse gas emission-reduction targets.
“In 2021, we anticipate even more companies announcing net-zero targets and more investor scrutiny of strategies that firms have put in place to meet targets… and we expect the next step to be at the investor level, with asset managers making net-zero commitments related to their investment portfolios,” says
Charlotte Edwards,
who is part of Barclays’ ESG research team.
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