Asset owners of the UN-convened Net-Zero Asset Owner Alliance have committed to lead the global investment industry in driving economies to carbon neutrality by 2050. Announced at the UN Secretary-General’s Climate Summit on September 23rd, 2019, the Alliance members commit to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial temperatures.
The Alliance, which represents more than US$ 2 trillion was initiated by Allianz, Caisse des Dépôts, La Caisse de dépôt et placement du Québec (CDPQ), Folksam Group, PensionDanmark and Swiss Re at the beginning of 2019. Since then, Alecta, AMF, CalPERS, Nordea Life and Pension, Storebrand, and Zurich have joined as founding members.
Convened by UNEP’s Finance Initiative and the Principles for Responsible Investment, the Alliance is supported by WWF and is part of the Mission 2020 campaign, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).
Concerned about the disruptive impacts that unabated climate change will have on societies and economies, now and in the future, responsible asset owners are powerful allies in global action to fight climate change and limit the rise in global temperature to no more than 1.5°C warming. As long-term investors who must look far into the future to fund their liabilities, asset owners are keen to ensure that the global economy prospers, that climate-related risks are addressed, and that opportunities to invest in a cleaner tomorrow are captured.
“Mitigating climate change is the challenge of our lifetime. Politics, business and societies across the globe need to act as one to rapidly reduce climate emissions. We, as asset owners, will live up to our responsibility and, in dialogue with the companies in which we invest, steer towards low-carbon business practices. We’ve already started and, by 2050, our portfolios will be climate neutral,” said Oliver Bäte, Allianz’s CEO.
Many investor and asset owner initiatives focusing on climate change exist today. While many of these initiatives are worthwhile and deserve further strengthening and promotion, their respective impacts will benefit from a clear commitment in combination with greater alignment and coordination.
How will Alliance members reach their targets?
Members will seek to reach their net-zero commitment by advocating for, and engaging on, corporate and industry action, as well as public policies, for a low-carbon transition of economic sectors in line with science and under consideration of associated social impacts. The commitment is made in the expectation that governments will follow through on their own commitments to ensure the objectives of the Paris Agreement are met.
Intermediary target setting will occur at portfolio level to ensure that portfolios decarbonise in a timely and gradual manner. In order to achieve this, asset owners will need to set intermediate targets in line with Article 4.9 of the Paris Agreement (for 2025, 2030, 2040). It is necessary to create milestones to determine progress towards the long-term goal.
The Alliance will serve as a one-stop-shop for state-of-the-art tools and advice for asset owners. Influence will be increased by fostering one voice and ensuring the Alliance aligns with other initiatives for investors who demonstrate leadership on the topic of decarbonisation. Most importantly, the Alliance is key to future-oriented risk management.
Commitments will emphasise:
- Investor ambition and target-setting at portfolio level; reporting of contribution to progress in a sector-specific way.
- Impact on the real economy and emissions; to the extent methodologies can be developed for this.
- Implementation via a holistic environmental, social and governance approach for measuring and managing associated impacts.
- Joint engagement, and monitoring of engagements, based on the most authoritative, credible scientific input to ensure consistency of messaging and ambition. This will build on existing good practice in active ownership such as that under development with Climate Action 100+.
The science and global climate policy
The 2018 IPCC Special Report on Global Warming of 1.5°C highlights the urgency of climate change and that the window for action is closing. The UN Secretary-General’s Climate Summit on 23rd September 2019 is be a key moment for governments to increase their ambition through stronger pledges to reduce emissions.
The summit will also be an important moment for the private sector— including investors—to demonstrate our ambition, through launching a multi-year approach towards emissions reduction.
Christiana Figueres, Convenor of Mission 2020, has supported the Alliance. She said:
“The urgency of the climate crisis demands decisive leadership, so it is encouraging to see asset owners flex their financial muscle and guide companies they’re invested in towards a net-zero emissions world. The science is clear, we need to halve our planet warming emissions by 2030 to get on track. Investors are waking up to the enormous economic transformation that entails and starting to put their money behind it, but we are going to need more money, more scale and more speed if we are to deliver a liveable future for the young people calling for action from the streets.”
Call to action
To ensure maximum impact, the Net-Zero Asset Owner Alliance members actively encourage additional asset owners to join them in their quest to decarbonise investment portfolios and achieve net zero emissions by 2050.
This announcement comes a day after the launch of the UN Principles for Responsible Banking, when 130 banks collectively holding USD 47 trillion in assets, or one third of the global banking sector, signed up to the new sustainability framework. These actions together confirm that the finance industry is stepping up and taking action to deliver the goals of the Paris Climate Agreement.
For more information visit the Net-Zero Asset Owner Alliance website.
To join the Alliance, contact UNEP FI Climate Lead, Remco Fischer.