A growing number of institutional investors are pledging to achieve net-zero carbon emissions in their portfolios by 2050, according to a new survey by Cerulli Associates.
Nearly a third of asset managers (31 per cent) and institutional asset owners (32 per cent) said they’ve made a formal commitment to a net-zero goal, while another 21 per cent and 29 per cent, respectively, said they plan to do so in the next two years.
The survey found respondents are taking multiple actions to achieve their climate change goals, including active ownership, divestment and investment in climate solutions. More than two-thirds (69 per cent) of asset managers and 41 per cent of institutional investors are voting proxies and supporting public shareholder proposals in favour of climate-related issues.
Similar percentages — 67 per cent of asset managers and 41 per cent of institutional investors — are developing or investing in climate change solutions. And 61 per cent of asset managers and 36 per cent of institutional investors are having dialogue with companies and their management teams to reduce carbon emissions.
“The rules of engagement have changed for the industry as a number of stakeholders, including peers, are putting pressure on investors to commit to net zero,” said Michele Giuditta, director of the institutional practice at Cerulli, in a press release.
As they pursue plans to achieve climate change goals, investors are also gauging progress by measuring and reporting on the underlying sources of carbon emissions. The most common type of reporting used by asset managers is carbon footprinting, with 79 per cent of asset managers polled measuring the carbon emissions in their portfolio and success toward their net-zero goal. Nearly a third (32 per cent) also prepare climate scenario analysis and reporting on portfolio exposure to physical and transition risks.
“Given that achieving net zero is a rapidly evolving endeavour, the details of investor climate plans will change as policy, information, frameworks and investment solutions advance,” said Giuditta.
“While progress on standardization of disclosure and measurement is being made, there are multiple publicly available and service provider tools using varying methodologies, different data sources and different metrics. This makes it challenging for investors to navigate and identify climate risk and alignment to net-zero goals. To alleviate skepticism around whether these commitments are real, shorter-term goals with time-bound milestones, consequences for inaction and transparency into progress are necessary.”