NZAOA report reveals member shortcomings on thermal coal alignment

Nearly one-fifth of members of the Net Zero Asset Owner Alliance (NZAOA) had not met commitments on thermal coal policy by the end of May, according to the initiative’s third progress report.

Members of NZAOA are expected to align to its policy on thermal coal and other policy positions within 12 months of either publication or joining the alliance.

The report found that, as of May, 3 percent of NZAOA members had no position on thermal coal and a further 15 percent had a position that was not aligned with that of the initiative.

Alignment is on a comply-or-explain basis and responses provided by non-compliers are currently being reviewed by their peers as part of the group’s detailed accountability mechanisms, it said.

The results were published in NZAOA’s third annual progress report, in which the initiative also revealed that the absolute financed emissions of its members had fallen by 7.7 million tonnes of CO2 equivalent in 2022 despite an increase in membership numbers and assets.

The group has added five members since December last year, bringing the number to 86, representing a total of $9.5 trillion in assets. The insurance sector accounts for the majority of both members and assets.

Günther Thallinger, chair of NZAOA and a member of Allianz’s management board, told Responsible Investor that membership gains had “pretty clearly” slowed down, driven in part by the global economic situation and increasing politicisation of climate.

While the alliance is strong in Europe and has added new members in Africa and Asia, he said that growth should be stronger and that NZAOA is particularly looking to expand its expertise base in Asia and the US.

When asked what makes the alliance attractive, both on its own and relative to fellow GFANZ member the Paris-aligned Asset Owners, Thallinger said the NZAOA’s policy of having experts from member organisations producing the content and positions “is actually not easy to find in other alliances”.

Thallinger also referenced the fact that the initiative requires 2025 targets and documents absolute emissions, as well as its reporting on progress and the accountability mechanism.

“The secretariat really follows up with member organisations on how they set targets and whether they have published the targets, and aims to follow up on target achievement,” he said.

Accountability mechanism

The group’s accountability mechanism is a relatively new addition, formally put in place in March last year. It describes a process for assessing member compliance and sets out how misalignment with the NZAOA will be handled.

One member, which published targets but did not report them, and one member that has not published targets have entered the mechanism. Two members that failed to set mandatory engagement targets went through the mechanism last year and have now complied.

According to a list of individual member targets, Gabon’s sovereign wealth fund is overdue target disclosure. It did not respond to a request for comment.

The mechanism has already been applied to the alliance’s thermal coal position, and in the next reporting cycle will also be applied to its more recent oil and gas position paper.

The report also revealed that the number of members setting a target to engage their asset managers jumped from 19 in 2021 to 34 in 2023, while the number of investors committing to contribute to NZAOA position papers has doubled since last year.

In addition, it included an introductory note on gender parity in NZAOA governance. While just two of the seven member representatives of its steering committee are women, five of the eight work track leads, seven of the 11 secretariat members and one of the two secretariat co-chairs are women.

When asked how it planned to improve the gender balance of its steering committee, an NZAOA spokesperson said the alliance would encourage “female leadership” when it holds elections this year.