Global investors kickstart 1.5C decarbonisation process for portfolios

Some of the world's largest investors accounting for $5trn in assets under management have agreed to set time-bound decarbonisation targets that will see the organisations work with companies in their portfolios to align to climate action.

Global investors kickstart 1.5C decarbonisation process for portfolios

The Alliance members state that they do not wish to engage in divestment exercises

Under the UN-convened Net-Zero Asset Owner Alliance, 30 global investors have agreed on numeric and time-bound goals to reduce carbon emissions in alignment with the Intergovernmental Panel on Climate Change (IPCC) 1.5C scenario.

The targets cover the next five years and will see Alliance members reduce emissions by between 16% to 29% by 2025.

The Alliance was set up in September 2019 by investors collectively responsible for investments worth $2.4trn at the time, committing to ensure that their respective portfolios are carbon-neutral by 2050. The 30 members include the BT Pension Scheme, Allianz, Swiss RE and Zurich.

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.”

The investors have agreed to the decarbonisation principles under a 2025 Target Setting Protocol, which aims to decouple the asset owners’ emissions from the global economic recovery.

The investors have agreed to work with companies they invest in, or are yet to invest in, who are willing to align with the global decarbonisation trajectory. The Alliance members state that they do not wish to engage in divestment exercises.

In the first quarter of 2021, individual Alliance members will set their own portfolio targets. As the members span multiple countries, the targets will reflect current progress towards net-zero emissions, but also the geographical or political barriers that could limit more ambitious decarbonisation. The members have agreed to be vocal in advocating and influencing stronger climate policies.

UNEP FI’s head Eric Usher added: “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.”

Investors have been one of the most vocal groups in signalling for decarbonisation, especially as part of a green recovery from the coronavirus pandemic. In June, more than 100 investors called for European business and finance leaders to ensure the delivery of the bloc-wide Green Deal and deliver a green recovery from the coronavirus pandemic.

More than 50 chief executive from the banking and insurance sector – including BNP Paribas, AXA, Allianz, and Santander – have joined the “green recovery alliance” in the European Parliament. The alliance is committed to supporting post-pandemic “stimulus transformation plans” that places biodiversity and climate change as the central pillar of Europe’s economic policies.

Matt Mace

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