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In the last couple of months, Responsible Investor has spoken with two large asset owners on either side of the Atlantic which have opted not to set a net-zero goal.
Neither can simply be written off as sceptics – for instance, both are involved in high-profile climate engagement groups.
The North American fund representative told RI that they believe some investors with net-zero pledges may not have fully understood what they entailed when they made them.
The European fund representative said they had investigated the feasibility of making such a commitment but that the data was simply not there yet – although they added that the conversation was not closed.
Both raised the concern that, given the lack of movement in the real economy, net-zero goals could drive portfolio decarbonisation without real world impact.
In April, RI reported that New York City’s public pension fund, NYCERS, was just 5 percentage points short of its 2025 interim net-zero goal to reduce portfolio emissions by 32 percent, following the completion of its fossil fuel divestment at the end of 2021.
Without such divestments are short and medium-term targets achievable?
Concerns have also been raised about the potential for net-zero commitments to limit financial institutions’ ability to provide transition finance, as well as their suitability – or otherwise – for emerging markets.
The Net Zero Asset Owner Alliance warned in 2021 that it may need to “tolerate a ‘buffer’ or slight lag behind the scientific pathways” from members on decarbonisation, given the widening gap between climate science and real economy pathways.
Then this summer, PRI’s Nathan Fabian questioned how viable net-zero pledges were for the largest asset managers. He told delegates at a conference in Oxford: “The idea that a manager serving millions of different individual clients can set its own 2050 target and faithfully implement that supposedly on someone else’s behalf was frankly never going to work.”
Two years on from COP26, we would like to hear from investors how their experience of and thinking about net zero has evolved since the launch of GFANZ and the proliferation of commitments.
We appreciate that this is a sensitive topic, so our survey is fully anonymised. It is also free-to-access, to encourage input from across the industry, so please feel free to share it with other investors.
The results will be published in January.
