Assets Targeting ‘Net Zero’ Approaching Half of Global AUM

A global investment industry drive to align investment portfolios with a ‘net zero’ emissions target is approaching half of all global assets under management (AUM).

The Net Zero Asset Managers Initiative, launched in December 2020, last week confirmed that an additional 41 asset managers, representing $6.8 trillion in assets, have pledged to work with clients to achieve net zero alignment across their portfolios.

These new signatories bring the total number to 128, collectively managing $43 trillion in assets. The total AUM of managers signed up to the initiative is equivalent to the combined GDP of the US, China and the UK, and is close to half of all assets under management globally ($100 trillion).

Among the latest asset managers to join the initiative are Amundi, Sumitomo Mitsui Trust Asset Management, Franklin Templeton, MFS Investment Management, HSBC Asset Management and the international business of Federated Hermes.

Jenny Johnson, CEO and president of Franklin Templeton, said:  “We are excited to make the commitment to the Net Zero Asset Managers Initiative alongside the growing community of signatories. We approach our journey with the clear acknowledgement that we must commit to finding the data and solutions to help us achieve global net zero emissions by 2050.

“We will work toward this goal in a spirit of authentic engagement and partnership with our clients and stakeholders, in keeping with our belief that good stewardship as a global asset manager means managing and allocating capital to benefit our clients across generations.”

The initiative reflects a growing move around the world to actively reduce and offset carbon and other greenhouse gas emissions in an effort to limit the impact of global warming and climate change over the next 30 years.

Signatories pledge to prioritize real economy emission reduction targets and to take account of ‘Scope 3’ emissions in portfolios. Scope 3 relates to emissions indirectly linked to a company’s value chain.

Signatories must also create investment products aligned with net zero emissions and facilitate increased investment in climate-led solutions. Stewardship and engagement strategies should be implemented, and aligned to net zero targets.

The initiative organizers said that progress would be reported annually against Task Force on Climate-related Financial Disclosures (TCFD) recommendations, including implementing a climate action plan consistent with the UN’s ‘Race to Net Zero’ criteria.

Earlier this month, the International Organization of Securities Commission launched an attempt to help regulators assist asset managers in aligning with low-carbon transition targets.