Thirty of the world’s largest investors with $5 trillion assets under management have agreed on five year decarbonisation targets including a focus on supporting renewable energy in emerging markets.
Increasing the supply of renewables in the energy mix is seen as a key lever for the UN-convened Net-Zero Asset Owner Alliance members to reach portfolio decarbonization targets of between 16 and 29% in line with the Intergovernmental Panel on Climate Change’s 1.5°C scenario for the next five years.
The alliance includes investors such as Aviva, AXA, Zurich, the David Rockefeller Fund and the Church of England and will implement the reductions from 2019 levels.
The group’s 2025 Target Setting Protocol lays out plans for this substantial decoupling of asset owners’ portfolio GHG emissions from the global economy, and has been published for public consultation.
The Alliance say the protocol will increase investment in the net-zero emissions transition and enhance influence on markets and government policies, and act as a clear signal to the companies it owns that deep emissions cuts are required.
The investors added that they would work with companies to adjust their business models, and do not wish to engage in a divestment exercise, but that substantial government action would also be required.
In the first quarter of 2021, individual Alliance members will set their own portfolio targets from different starting points with respect to the level of carbon emissions currently contained within their portfolios.
Several Alliance members will set large reduction targets, while others have already made substantial progress in their journey to net-zero, therefore the reductions required for their portfolios will be at the lower end of the range.
Meanwhile for others a lower 2025 target may reflect geographic or policy constraints that require them to decarbonize more slowly in early years.
The Protocol was constructed to allow Alliance members to employ the combination of approaches that best supports their unique decarbonisation and engagement strategies and acknowledges their different carbon levels as of today, it added.
The first steps towards Alliance commitments are both transitioning investment portfolios to net-zero GHG emissions by 2050; and achieving this through advocating for, and engaging on corporate action, as well as public policies, for the low-carbon transition of economic sectors in line with science and under consideration of social impacts, it said.
Defining net-zero pathways must take both goals into account, while also considering implications for a just transition.
Engagement with portfolio companies is a core component to assure that not only the Alliance members’ portfolios transition to net-zero, but that the Alliance members also have an impact on the real economy.
Alliance chair and Allianz SE management board member Günther Thallinger 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,” he adds.
UN Environment Programme Finance Initiative head Eric Usher said: “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.”