As part of the UK's presidency of COP26, the UK Government encouraged industry to commit to support the objective of transitioning the economy to net zero greenhouse gas emissions by 2050. Specifically, the Race to Zero Breakthroughs were launched in January 2021, setting a target for industry to make a net zero commitment which is aligned with the UN-led Race to Zero.
The Race to Zero is an umbrella initiative for net zero climate change initiatives involving non-state actors. This includes cities, large corporates, small businesses, charities and parts of the financial services industry, among many others. This was launched in 2020 to act as a counterpart to the net zero commitments which have been made by national governments since the Paris Agreement was signed in 2015, if not even earlier.
Following the launch of Race to Zero, the industry launched its own commitment – the Net Zero Asset Managers initiative – in December 2020.
The IA is proud to support members signing up to the Net Zero Asset Managers initiative and was named as the first official supporting partner organisation to NZAM in July 2021. To date, investment managers with £7trn of assets under management in the UK have made these net zero commitments. This represents nearly three-quarters of the AUM in the UK.
By becoming a supporting partner organisation of NZAM, the IA is formalising a commitment we made with the full support of the Board to support the Race to Zero, the Net Zero Asset Managers initiative and any members considering becoming signatories.
Understanding the Net Zero Asset Managers initiative
Listen back to our webinar with the COP26 Private Finance team and IIGCC recorded on 17 May 2021. The webinar provides an overview of the Net Zero Asset Managers initiative and covers the key requirements and benefits for investment managers joining the initiative, how the initiative operates, and how investment managers can join.
The Net Zero Asset Managers (NZAM) commitment requires signatories to demonstrate that their approach to net zero in based on a robust methodology. The commitment is described as "methodology neutral" and investment managers are encouraged to select a target-setting methodology which is appropriate for their business. Nonetheless, the NZAM network partners recognise and endorse three target setting approaches:
NZAM published its first annual Progress Report in November 2021. Of the more than 40 investment managers to provide target disclosures in this first progress report, the majority stated that they were using PAII’s Net Zero Investment Framework as a guide to methodology. The SBTi's financial sector guidance was the second most commonly used framework.
Investment managers are invited to explain their rationale if they select an alternative methodology. The small minority of NZAM signatories which have chosen an alternative methodology have stated that is based on the EU Climate Transition Benchmark (EU CTB) or EU Paris-Aligned Benchmark (EU PAB).
For investment managers intending to produce a climate action plan but not yet wishing to make a net zero commitment, the Investor Agenda has produced the Investor Climate Action Plans (ICAPs) Expectations Ladder and Guidance, a framework which it describes as "inclusive and unique in that it sets out expectations for investors wherever they may be on their climate journey."
We held the first meeting of the IA’s new Net Zero Forum on Tuesday 12 October. For this first meeting we were joined by Daisy Streatfeild of the IIGCC to discuss the Investor Agenda’s Expectations Ladder for Investor Climate Action Plans.
We hope the forum will enable peer-to-peer knowledge sharing and provide a platform for all IA members to raise questions and find solutions in their journey to net zero.
If you are interested in joining the Net Zero Forum please contact Paul Scaping. We would like to understand the issues, relating to both investments and operations, on which members would find it useful for each forum meeting to focus. To support this, I would be grateful if any members wishing to attend the forum and raise a question could submit it in advance. To enable an exchange of information which supports the whole industry we would particularly like to encourage members with experience of pursuing net zero policies to attend and share this experience with colleagues.
The Investment Association publishes a monthly net zero news bulletin, 'The Path to Net Zero'. This newsletter will keep members updated on developments from the IA and UK policymakers towards the goal of tackling climate change.
This bulletin is sent to relevant IA committees and all subscribers to the IA sustainability and responsible investment mailing list. To ensure you're subscribed to future editions please click here and follow the instructions.
Previous editions of the bulletin can be viewed at the links below.
The Glasgow Financial Alliance for Net Zero (Progress Report), GFANZ (Nov 2021)
Net Zero Asset Managers initiative (Progress Report), NZAM (Nov 2021)
Guidance on Metrics, Targets and Transition Plans, TCFD (Oct 2021)
Climate Data and Metrics, Climate Financial Risk Forum (Oct 2021)
Disclosures - Managing Legal Risk, CFRF (Oct 2021)
Five challenges for net zero investing, BMO Global Asset Management (Aug 2021)
Investor Climate Action Plans: Expectations Ladder, the Investor Agenda (May 2021)
Guidance on Using the Expectations Ladder, the Investor Agenda (May 2021)
Financial Sector Science-based Targets Guidance, SBTi (Apr 2021)
Net Zero Investment Framework Implementation Guide, PAII (Mar 2021)
IIGCC Net Zero Investment Framework: Portfolio Testing Results, Planetrics (Mar 2021)
The Alignment Cookbook, Institut Louis Bachelier (Jul 2020)
Foundations of Science-based Target Setting, SBTi (Apr 2019)
Last update: 12 May 2022