Investor group makes net-zero carbon pledge to tackle climate crisis

Managers commit to investing only in companies with net-zero CO2 emissions by 2050.

Some of the world’s largest investors managing assets worth more than $9tn have committed to investing only in companies with net zero carbon dioxide emissions by 2050 as part of the fight to contain the climate crisis.

Legal and General Investment Management, the UK’s largest investor, and UBS Asset Management are among the signatories to a pledge that they will aim for all companies in their portfolios to be decarbonised by 2050 or earlier.

The largest investors have significant power to force companies to decarbonise because of their role as shareholders in many of the world’s largest polluters. However, the global investment community at large has faced criticism from campaigners who argue that investment firms are often too focused on shorter-term profitability, rather than actively backing climate action.

The net zero pledge comes shortly before the five-year anniversary of the Paris agreement, which committed most of the world to limiting global heating to 1.5C above pre-industrial levels. Since then, progress on meeting that aim has been decidedly mixed, but the investors’ 2050 pledge would put them in line with the EU, the UK and Japan.

Other investors to sign up to the net zero pledge included Fidelity International, Schroders, Wellington Management, Axa Investment Managers and M&G. So far 30 investors, mainly from Europe, have signed up.

The investors who signed the pledge, labelled the net zero asset managers initiative, have committed to “prioritising the achievement of real economy emissions reductions within the sectors and companies in which the asset managers invest”.

The signatories will set interim 2030 targets to decarbonise their portfolios – including so-called “scope 3” emissions from companies’ products, such as carbon from burning fossil fuels such as coal and oil. These targets will be reviewed every five years, and the signatories have committed to using their shareholder voting and lobbying power to favour climate action.

The pledge also allows companies to use carbon offsetting, the controversial reduction of emissions in other parts of the economy while still releasing new carbon dioxide into the atmosphere.

Lucie Pinson, the founder and director of Reclaim Finance, a campaign group, said she was sceptical about whether the new investor group would achieve its goals.

“We seem to have a lot of platforms and not enough trains,” she said. “Without question, what we do need is a truckload more ambition from investors. Will this group deliver that? It seems unlikely, given that there is no collective commitment to exclude coal or to halt the expansion of oil and gas, both seriously at odds with the stated goal of this coalition.”

However, Stephanie Pfeifer, the chief executive of the Institutional Investors Group on Climate Change, one of the groups coordinating the pledge, said she hoped the investors would “tip the balance in favour of the global economic transition to net zero”. She added: “This is action – not simply words.”

The initiative was coordinated by climate action investor groups in Europe, North America and Australia, but the majority of the groups’ members have still not signed up to the net zero pledge.

Among the most notable absences are BlackRock, the world’s largest asset manager, or the investment bank Goldman Sachs’s asset management arm, even though both have promised to increase their focus on climate issues.

Other major asset managers lag even further behind. Vanguard, the world’s second largest asset manager, has so far refused to sign up to major investor climate action groups.

11 December 2020

The Guardian