NZAOA warns entire economic system is at risk

February 15th, 2024

The Net-Zero Asset Owner Alliance (NZAOA) has warned that asset owners would only be able to meet their clients’ net zero aspirations through climate stewardship.

The United Nations-backed group of institutional investors with $9.5 trillion in assets under management has released a call to action urging asset owners to commit to a net-zero strategy.

It asserts that asset owners committed to net-zero expect their asset managers in private and public markets to pursue integrated and tailored climate strategies across all their functions.

It identified four critical implementation principles for asset manager leadership. Firstly, bringing the focus of addressing the systemic risk of climate change to the entirety of investments and operations and, secondly, supporting a consistent, clear, and accountable proxy voting landscape (for public equity).

The third principle requires asset managers to align lobbying activities with their own stated climate-related commitments do the same for portfolio companies, and the fourth is to ensure that climate engagement is more systematic and transparent, especially on its own limitations.

It said: “Implementing these [four principles] not only protects the long-term financial interests of both the asset managers and their asset owner clients, but it would also increase the ability of asset managers to win mandates from asset owners committed to net zero, which are growing in numbers.”

The members announced that they have all committed to transitioning their investment portfolios to net-zero greenhouse gas (GHG) emissions by 2050 consistent with a maximum temperature rise of 1.5°C above pre-industrial temperatures.

The commitment considers the best available scientific knowledge including the findings of the Intergovernmental Panel on Climate Change (IPCC), and requires the members to regularly report on progress, including establishing intermediate targets every five years.

In October, the NZAOA urged policymakers to overcome political barriers and open up $275 trillion in climate investment opportunities.