For investors and companies, net-zero pledges prove easier than action

ImpactAlpha Editor

Dennis Price

ImpactAlpha, Jun. 14 – It’s one thing to join a climate initiative, another to commit assets and yet another to align assets with those climate goals.

More than 273 asset management firms responsible for $61.3 trillion in assets have joined the Net Zero Asset Managers initiative, a group of investment managers committed to reaching net-zero greenhouse gas emissions by 2050 or sooner. Of those, 83 have set net-zero targets, and those targets cover just $16 trillion of their combined $42 trillion in assets, according to the group’s progress report.

That means that 18 months in, only a little over a quarter of the assets of Net Zero Asset Managers are being managed in line with net zero goals (signatories have a year from the time they join to submit their targets).

Among challenges to progress: The current energy crisis, the changing regulatory environment and the increased politicization of ESG issues, says the group.

  • Corporate net zero. In a separate analysis, Net Zero Tracker finds that a third of world’s largest publicly traded companies now have net zero targets, up from a fifth in 2020. The downside: About 65% of the targets do not meet “minimum procedural standards of robustness,” according to Net Zero Tracker. Only 38% of companies claim to cover all Scope 3 emissions in their supply chains.
  • Beyond net zero. In another report, none of the 35 leading ESG passive funds align with a new Paris-aligned passive investing framework from the World Resources Institute. “Although many Investors have made net-zero commitments to reduce carbon emissions, the Paris Agreement encompasses more than just emissions reductions,” write WRI researchers. WRI’s framework includes guidance for climate mitigation and resilience, as well as a just transition, and “do no harm.”