World’s biggest responsible asset owners call on service providers to help with zero-carbon goals

UN-backed Net Zero Asset Owner Alliance puts out call for comment

The Net-Zero Asset Owner Alliance, the $4trn UN-backed group of asset owners committed to decarbonising their portfolios, has laid out “demanding” expectations for services providers, as it puts out a call for comment on the “urgently” needed “convergence” of carbon neutral methodologies.

The Alliance is looking for support from the market to advance net-zero target setting because, it says, no provider “currently fulfils enough requirements” for members to “converge” on an existing solution to report and monitor their decarbonisation efforts.

‘Preparing this document will indicate needs from Alliance to a range of service providers who may be interested in tailoring their products to the standards contained herein’ — Net Zero Asset Owner Alliance.

The investors outline in an accompanying document a list of “expectations” that carbon neutrality methodologies must meet to satisfy their needs (see below). 

They acknowledge that these expectations are “demanding”, but recommend that they be seen as a “roadmap to highlight a trajectory over time”.

The group also revealed that its decarbonisation work will be conducted in “close coordination” with the Taskforce on Climate-related Financial Disclosure’s (TCFD) Implied Temperature Rise working group and the COP26 Climate Finance Track.

Neither the Alliance nor the TCFD secretariat, however, will “advocate for a specific commercial solution”, it stressed. “Members will be free to choose individual tools provided these fit the remits outlined in this document.”

The Net-Zero Asset Owner Alliance was initiated by Allianz, Caisse des Dépôts, La Caisse de dépôt et placement du Québec (CDPQ), Folksam Group, PensionDanmark and Swiss Re at the beginning of 2019. Since then, other heavyweights have joined from around the world, including Alecta, AMF, CalPERS, Nordea Life and Pension, Storebrand and Zurich. 

Members pledge to transition their investment portfolios to net-zero emissions by 2050, in line with the Paris Agreement to limit global temperature rise to 1.5°C.

The investors are now looking for confidential feedback on their expectations until 1 May. Data and service providers, NGOs, other investors, government representatives, academia and civil society are encouraged to engage, and comments will inform the alliance’s work on topics such as target-setting guidance, reporting, methodological uses, and public progress reports. 

The expectation document outlines six “core principles”, which include a number of “must haves”. They are:

Impact: The methodology must provide investors with a “quantified view of the impact of their investments on climate change”.

Forward-looking: The methodology must provide investors with a “forward-looking metric, at five year intervals through to 2050”. 

GHG footprinting: GHG emissions footprinting must form the basis of the methodology.

Portfolio alignment/ investment “temperature”:  The methodology “must deliver a ‘core’ metric expressed in terms of a forward-looking carbon KPIs (both relative to production and absolute) as well as temperature KPIs, for users to assess considerations around portfolio alignment with the Paris Agreement”.

Science-based decarbonisation: The methodology must be based on adequate IPCC scenarios and seek to promote “real world impact” by encouraging investment decisions that lead to a decarbonisation of the economy.

Portfolio management: The methodology must enable the comparison of individual companies within a sector, identifying which are better aligned with net-zero by 2050 or an implied temperature rise of 1.5°C, as a basis of all investment decisions.

The expectation document also lays out the alliance’s ‘technical assumptions’ and ‘usability & platform requirements’.