30+ asset owners commit to report on 2025 decarbonisation targets

Monde
On the 01/14/21 at 5:10PM

by

Adrien Paredes-Vanheule

Thirty-three of the world’s largest institutional investors have committed to set and report on 2025 decarbonisation targets through the Net-Zero Asset Owner Alliance’s Inaugural 2025 Target Setting Protocol.

The Net-Zero Asset Owner Alliance has published its inaugural 2025 target setting protocol on Thursday in the aftermath of a two-month public consultation initiated in October on the protocol approach. The 2025 decarbonisation targets are set on asset owners’ own Scope 3 emissions (or portfolio emissions) with 2019 as base year and full year 2024 as targeted year. They rely on four pillars – engagement, portfolio decarbonisation targets, sectoral targets and climate positive investments – and apply to listed equities and publicly traded corporate debt while real estate is also targeted.

To define their own 2025 engagement targets, Alliance members should identify either 20 companies with a focus given to the highest emitters or those responsible for 65% of their portfolio owned-emissions, which do not already have Paris-Aligned business transition commitments. Action targets to engage the identified firms must be conducted either through direct, collective, or asset manager action. As for portfolio decarbonisation targets, the Alliance members shall cut CO2 emissions within a 16%-29% range by 2025.

Besides setting Scope 3 emissions targets, the Alliance members are encouraged to set net-zero targets on their own Scope 1 and 2 emissions, “as possible.” The coalition recommends that members set targets on Scope 1 and 2 emissions for their underlying holdings and on Scope 3 of underlying holdings for ‘priority sectors’  (Oil and Gas, Utilities, Steel, Aviation, Shipping and heavy and light duty road transport) when possible. “At portfolio level, Alliance members should track Scope 3 emissions, but are not yet expected to set targets until data becomes more reliable,” explains the Alliance in its protocol.

Günther Thallinger, Alliance chair and member of the board of management at Allianz SE, said: “The founding of the Alliance and the publication of the protocol has set the net-zero implementation ball rolling. Investors and companies across the globe must follow by publishing their own rigorous, science-based and accountable targets. We, the Alliance members, start out by truly changing ourselves today and then work with other companies to achieve change.”

“Business needs to become sustainable, actually capitalism needs to become sustainable. By changing investment decision-making and including climate neutrality as a shorter-term objective, asset owners are making a big contribution,” Thallinger added.

The Alliance seeks to draw a minimum of 200 members or $25trn in combined assets under management across the group in the mid-term. It will itself publish an annual qualitative progress report, and a more detailed report on quantitative achievements every five years. The Net-Zero Owner Alliance requires from its members to publish interim targets every five years.