The UN-convened Net-Zero Asset Owner Alliance (AOA), an investor group representing $5trn in assets under management, has said it is working to partner with Climate Action 100+ as it launched a consultation on its 2025 Target Setting Protocol today.
“Corporate engagement is one of the key tools that investors have to achieve the 2025 portfolio targets that the AOA Protocol released today will facilitate,” an Alliance spokesperson told RI. “And CA100+ provides an existing and effective platform for that that AOA members already are using and will continue using exponentially.”
CA100+ is the largest single-issue investor group in the world. Set up in 2017 and now with members managing around $40trn, it is dedicated to collaborative investor engagement with some of the world’s biggest emitters.
AOA’s proposed protocol, which investor members will have to follow and report against over the next five year, focuses on providing quantitative targets for portfolio decarbonisation, and is open for one month.
The AOA reported that in June it “entered into a working collaboration with the Science-Based Targets Initiative for Financial Institutions (SBTi) to support the validation of financial institution climate targets”.
The initiative has also set a “recruitment target” aimed at achieving a minimum of 200 members or $25trn AUM in the mid-term.
“The Alliance seeks to fill a gap connecting investor ambition and investor action on the global net-zero emissions target set in the Paris Agreement,” the AOA stated, adding that it sees engagement targets as a necessary component of the Protocol. “Alliance members should identify either the top 20 non-aligned emitters or those responsible for 65% of emissions in a corporate bond/equity portfolio” and set targets accordingly to engage them, AOA proposes.
The consultation paper warns that “only a few corporates have announced net-zero commitments and, of those who have, fewer have articulated intermediary targets for 2025”.
The consultation also seeks views on the Alliance’s preference to “use an absolute Total Carbon Emissions approach for target setting” as opposed to intensity-based targets. This is a key issue when it comes to measuring alignment with Paris goals. Carbon intensity targets measure reduction of emissions in relative terms (per unit of energy produced or per unit of GDP in the case of countries), so if energy production or GDP increases, so do emissions. That’s in contrast to a reduction in total or absolute emissions.
Separately, an engagement campaign coordinated by corporate disclosure advocate CDP has been launched today asking 1,800 companies to set Paris-aligned targets using the SBTi.A group of 137 investors representing $20trn are behind the campaign, including AXA Group, Legal & General Investment Management and Generation Investment Management. They are targeting companies such as Tesla, Roche and Rio Tinto.