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Keeping Up With Institutions in a Race to Net Zero

Stranded Asset Management.

To date, 137 countries around the globe have made net zero pledges, meaning their economies will become net neutral in terms of carbon emissions. While the process of translating these pledges into laws and concrete action is at an early stage, the sheer pace of announcements has been impressive, with the US and China making their net zero pledges this year. Together with the EU, which made its net zero pledges a few years earlier, these economies account for about half of global carbon emissions. Most countries target 2050 to become carbon net neutral, which is triggering an enormous transformation in how global economies will produce goods and services over the next 30 years.

We found that institutions are:

  1. Increasingly confident and assured in their ESG approach – especially European institutions.
  2. Reacting to more than just climate regulation – and see a moral responsibility partnered with the ability to reduce risk and enhance returns.
  3. Making ambitious net zero targets – in some cases, decades ahead of government commitments.
  4. Making significant changes in response to climate change across their entire businesses, not just investment – with an expectation that these changes will continue.
  5. Facing challenges measuring greenhouse gases in emerging markets especially – with private assets the next problem group.
  6. Readily using low GHG (Greenhouse Gas) emission indices as a ‘quick win’ to lower climate risk in their portfolios – with customization common.
  7. Looking for asset managers with strong proprietary research, and clear integration of climate risk and opportunities into investment processes, along with a credible engagement approach on climate issues.
  8. Valuing asset managers as thought partners – cited above investment consultants and other organizations as partners in furthering their approach to addressing climate change.

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