More asset owners to set green transition targets


13 Mar 2024

Hitting a net-zero target is not easy, finds Andrew Holt.

Hitting a net-zero target is not easy, finds Andrew Holt.

A quarter of asset owners intend to set a formal net-zero commitment within the next 12 months, according to a study.

Research company Cerulli found that while 14% of asset owners have a formal net-zero commitment, an additional 25% plan to set one this year.

Specifically, almost a third (30%) of institutions are investing in strategies that support the transition to a carbon-neutral economy, and 36% plan to invest in these tactics within the next year.

As expected, many are moving away from coal, gas and oil, as half of the institutions surveyed say they will either divest (29%) or plan to divest (21%) from fossil fuel funds.

But even with a rising interest in sustainable investments, fossil fuel funds remain prominent due to their high returns.

One interesting statistic from As You Sow, a not-for-profit that promotes corporate social responsibility, reveals that 19% of the market cap of US fossil fuel companies comes from investments in US 401(k) accounts and individual retirement accounts.

Now, institutions are enacting these changes in order to prioritise and address climate risks, with 61% saying the issue of climate change is the top theme in their responsible investment strategy, revealed Cerulli.

New kid on the block

Despite their determination, investors continue to face difficulties when analysing the carbon footprints of underlying investment portfolios.

Inevitably, the lack of climate transition-related data has been consistently cited as a challenge for investors in understanding which companies are being transparent and dedicated to their climate change commitments.

However, there could be hope here.

A new platform called the Net-Zero Data Public Utility database is planning to enter the market to hopefully once and for all establish reliable and accessible climate data across multiple industries.

That would address many of the issues investors have.

The database comes with some big names attached: formed by Emmanuel Macron’s and Michael Bloomberg’s Climate Data Steering Committee, it is designed to be integrated with the UN Framework Convention on Climate Change’s Global Climate Action Portal, which identifies how companies, investors, organisations, regions and cities are engaging in global climate action.

As more investors re-examine their contributions to climate change, Cerulli said it expects to see a rise in collaborations that promote transparency when analysing climate-related funds.

A new framework

The survey’s findings come as GLIL Infrastructure, a £3.6bn investment fund, revealed that it has adopted a new investment management framework to help it become net zero by 2050.

The adopted approach – the Institutional Investors Group on Climate Change (IIGCC) Net Zero Investment Management (NZIM) framework – sets out clear methodologies and approaches for investors to align their portfolio goals with the Paris Agreement, supporting them to make informed decisions and work towards achieving net-zero global emissions.

The NZIM framework was published in March last year and GLIL was one of the first investors to adopt its guidance for infrastructure, which builds on IIGCC’s broader NZIM framework.

It is said to be the most implemented net-zero methodology for investors across all nancial institutions within the Glasgow Financial Alliance for Net Zero.

The GLIL executive committee said it has worked “swiftly to select the new framework” to support the business with structuring its net-zero strategy and to allow for a consistent framework across its portfolio.

GLIL believes the NZIM approach will enhance its work in the energy transition by providing further support for its existing portfolio companies to ensure they have achievable net-zero pathways.

Beth Breen, ESG analyst at GLIL Infrastructure, said: “As a fund which delivers valuable investment into critical infrastructure projects across the UK and beyond, we know it is our responsibility to ensure that net-zero commitments are carried out within an effective strategy to achieve our 2050 targets.

“We believe the NZIM framework will allow infrastructure investors to bring further substance to their net-zero ambitions in a sector where it has been largely lacking. Our adoption of this new framework aligns with our members’ commitment to driving the energy transition towards a sustainable net-zero economy.”

GLIL is the partnership of UK pension funds specially designed to help pension fund members tap into the stable, inflation- linked returns that infrastructure investment o ers.

It manages £3.6bn of committed capital, with more than £3bn deployed into a portfolio of infrastructure assets spanning renewable energy, battery storage, regulated utilities, ports and logistics, trains, hospitals and schools.

GLIL’s focus on the energy transition can be seen in the fund’s latest investment in a portfolio of 247MW of operational UK solar assets.


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