Net Zero Asset Managers Initiative

Investments in net zero asset managers are becoming increasingly common, with more people demanding transparency and commitments from their asset managers. But what are the benefits of this initiative? How can we determine which managers are on track to achieve this goal? Read on to find out. This article also addresses the Signatories and Goals of the net zero asset managers initiative. And, of course, we'll discuss how to get involved. Here are five things you should know about the initiative.

Investments in net zero asset managers

In line with the goal of reaching net zero emissions by 2050, the Net Zero Asset Managers Initiative requires companies to make their investments in net zero-emissions securities. In addition to this, signatories are required to disclose their climate risk and their investment products with robust disclosures. Signatories are also required to engage with investors and non-investment institutions, including credit rating agencies, proxy advisers and investment consultants.

Net Zero Asset Managers is a global coalition of 41 leading asset managers representing nearly 40% of total assets under management. It is an industry-wide initiative that aims to see net zero emissions in the world by the year 2050. Signatory firms pledge to engage with clients, advocate for policy change, and shepherd their investments towards achieving the initiative's goals. Investments in net zero assets managers initiative are growing rapidly, as more institutional investors look to invest in sustainable companies that have a strong environmental footprint.

The Net Zero Asset Managers initiative has grown in size since its launch and is now worth almost half of the global asset management market, which is currently estimated at $100 trillion. The initiative was founded by two prominent asset managers, Brown Advisory and Vanguard Group. Its commitments to a zero-emissions future were outlined in a report published by the Institute for Sustainable Investment Management in January 2018.

Signatories

The Investor Agenda endorses the Net Zero Asset Managers initiative. The organisation oversees six investor networks and its Steering Committee is made up of senior executives. This committee ensures the signatories receive the support they need in their efforts to reach net zero emissions by 2050. The Steering Committee also receives input from an Advisory Group made up of asset managers who have endorsed the initiative. Legal and General Investment Management, Wellington Management and other asset managers also sit on the Steering Committee.

The Signatories of the Net Zero Asset Managers Initiative have pledged to be transparent and rigorous in their reporting on climate-related financial disclosures. They must also implement a climate action plan and ensure it is based on robust methodologies and the Race to Zero campaign criteria. Signatories also commit to publish annual climate action plans. Signatories should share their climate action plans with the Investor Agenda. There are many advantages for signatories of this initiative.

This initiative has been launched to encourage asset managers to reach net zero emissions by 2050 and keep global temperature rises below 1.5 degrees Celsius. Since its launch, the initiative has gained a considerable number of signatories. Now, more than half of the world's asset management industry is a member of this initiative. It is hoped that the new Signatories will continue the momentum of the initiative and help move the industry towards a zero carbon future.

Goals

The Net Zero initiative is designed to help managers achieve carbon neutrality by 2050 and promote stewardship. As part of its goals, managers must work with companies to establish credible emissions reduction targets and quality offsets. Without offsetting, portfolios cannot achieve Net Zero. The following are key elements of the initiative. Listed below are several strategies asset managers can use. Each approach can be beneficial for a particular asset class or sector.

Investor Agenda is an organization of asset managers that endorses the initiative and oversees six investor networks. Investor Agenda executives serve on the Steering Committee, which includes CEOs of the network partners. The Steering Committee ensures that signatory asset managers are receiving relevant support. Investors are also informed by an Advisory Group, led by Catherine Oden of Legal & General Investment Management and Wendy Crowell of Wellington Management.

The Initiative's goals also support the Paris Agreement, which commits global financial institutions to net-zero emissions by the year 2050. This goal has been met by a handful of companies, but the initiative's members are now working on building the framework for a larger, voluntary carbon market. This could result in a large influx of long-only managers. These managers are likely to move into sectors with intangible assets and services.

Transparency

The investors behind the initiative have set an ambitious target: a reduction of 50% in global greenhouse gas emissions by 2050. These targets are part of an overall commitment to achieve net zero emissions by the end of the century. To achieve this, the asset managers must set interim targets and review them every five years. As more signatories join the initiative, further commitments will be made. Investors can expect further disclosure and broader investor engagement.

The Climate Investment Initiative, launched in December, is one such initiative. The goal is to inspire asset managers to make the transition to net zero by the end of the century. In doing so, it aligns with the goals of the Paris Climate Agreement, including limiting global warming to 1.5°C. It also supports the efforts of governments to tackle climate change. This initiative is only one of many initiatives available to investors. There are still many obstacles in the way of achieving net zero.

Asset managers who align themselves with the net zero goal must prioritize real-economy emissions reductions, including those attributed to material Scope 3 emissions. These actions must be communicated and implemented in line with the net zero goal. Investors and beneficiaries should initiate dialogue with asset managers to determine how these changes will benefit them. A net zero commitment is a commitment to comprehensively implement important actions, such as stewardship and policy advocacy.

Engagement with portfolio companies

Nomura Asset Management Co., Ltd., a core company of the Nomura Group's Investment Management Division, has joined the Net Zero Asset Managers Initiative (NZAMI), a global initiative led by asset managers to achieve net-zero greenhouse gas emissions by the year 2050. Its membership shows a commitment to climate change and promotes investment in companies aiming to achieve net-zero emissions by the same date.

The Net Zero Asset Managers initiative has more than 70 signatories globally, representing more than $32 trillion in assets under management. The scale of the initiative is truly remarkable, representing more than a third of the world's managed assets. And the breadth of signatories reflects the global significance of this initiative, which will require asset owners to embrace climate-resilient, low-carbon investing.

To achieve net-zero, asset managers must demonstrate greater ambition and transparency in assessing and managing risk. The initiative commits to publishing quarterly and annual reports comparing performance against the targets set by the Task Force. It also calls on global investors to align their investments with a 1.5degC scenario. To ensure the success of the initiative, asset managers must engage with their portfolio companies urgently to decarbonize and move toward a resilient economy.

As a part of its larger ESG and net-zero initiatives, Wellington Climate Alliance formed a partnership with the Woodwell Climate Research Center, a think tank that collects data on the impacts of climate change on capital markets. While the partnership focused on physical risks, it also included social and regulatory issues. Engagement with portfolio companies is essential for achieving net-zero asset management. It will provide the foundation for ongoing engagement.

TCFD disclosures

Investors can expect greater transparency and accountability from net zero asset managers. Asset managers are expected to make public their goals for carbon reduction. They should set interim targets and engage portfolio companies in their efforts to achieve net zero emissions by 2030 and 2050. TCFD disclosures will help track these efforts. In addition, the TCFD disclosures will also help the investor community track progress on net zero investing commitments.

TCFD also recommends that companies also make disclosures of other metrics, such as the proportion of assets they use in direct investment activities. Disclosures for net zero asset managers initiative should be consistent with other disclosure frameworks. The TCFD explains which metrics are useful to investors and provide examples. Those metrics will help investors assess whether a particular asset manager is on track to achieving its goals.

The TCFD also makes recommendations on how asset managers measure their portfolio's alignment with the Paris-aligned temperature pathway and climate scenario. Asset managers should also use forward-looking alignment metrics to determine whether their portfolio is positioned to benefit from the Paris-aligned goal. In addition to climate-related metrics, TCFD also calls for asset managers to disclose financed-emissions, which refers to greenhouse gas emissions that arise from investments.

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