Net-Zero Asset Owner Alliance targets private markets
UN-backed initiative has issued a ‘call to action’ to private market asset managers, urging them to address climate risk.
The Net-Zero Asset Owner Alliance has called on private market asset managers to make a public commitment to set net-zero targets on Scopes 1 and 2 emissions no later than 2025. The alliance has also urged such asset managers to offer net-zero funds.
In a report, the UN-convened alliance addressed issues such as asset managers’ governance structure, disclosures on portfolio greenhouse gas (GHG) emissions and financing the transition by seeking investments aligned with climate taxonomies.
The alliance also quoted data from private markets advisory Campbell Luytens showing that, of the roughly $6.3trn in total assets under management in private equity worldwide, currently only $183bn has been raised or is being raised for climate-focused private market strategies.
Members of the alliance, including the Folksam Group, PensionDanmark and SwissRe, have committed to transitioning their portfolios to net-zero GHG emissions by 2050. Eighty institutional investors are represented in total, with $11trn in assets under management.
For alliance members, meeting client interests and expectations is the only way to drive change in investee businesses, to secure sustainable and climate resilient portfolios, and to meet the alliance’s commitment to net zero.
Diversity of climate approaches
Patrick Peura, ESG engagement manager at Allianz and an “engagement track” co-lead at the alliance, said: “Among private asset managers, there is diversity of approaches to climate change that reflects their varied organisations – this is positive. However, each of these approaches should have the interests of their asset owner clients at the core and should meet their clients’ minimum expectations.
“For alliance members, this is the only way to drive change in investee businesses, to secure sustainable and climate resilient portfolios, and to meet the alliance’s commitment [to net zero].”
The alliance also requested that private market asset managers disclose data on financed Scopes 1 and 2 emissions in the next annual reporting cycle, and disclose data on financed emissions for financial year 2023. Asset managers were also urged to disclose Scope 3 emissions for financial year 2024.
At the board level, the alliance called for climate expertise across organisational structures, with a clear explanation of functions across climate roles.
For the oil industry, asset managers were requested not to finance upstream greenfield projects beyond those already committed by the end of 2021, with the alliance confirming that further guidance will be given in a forthcoming position paper on oil and gas.
This month, the alliance also called on index providers to develop net-zero-aligned benchmarks and on asset owners to apply them, arguing that such benchmarks are a “crucial tool” for integrating decarbonisation objectives into the investment process.
The calls to action from the alliance come ahead of the UN PRI’s Sustainable Finance Policy Conference, to be held in Barcelona from 29 November to 3 December.
