$9.5trn Net-Zero Asset Owner Alliance sees its first fall in financed emissions

The NZOA revealed the reduction in a new annual progress report today (18 October). It has been attributed to a mix of real-world emissions reductions, divestment from high-carbon businesses and sectors, and the re-allocation of finance within sectors to lower-carbon firms and projects.

Alliance membership is notably larger than it was this time last year. 12 firms have joined over the past 12 months, but the Alliance has managed to decouple this growth in membership from any growth in financed emissions.

Participants in the Alliance include Aegon, Allianz, Aviva, AXA, Legal & General and Munich Re.

The 86 firms now participating in the NZAOA collectively manage some $9.6trn of assets. 69 of the firms, collectively managing $8.4trn of assets, have now set near-term climate targets in line with the Alliance’s Target-Setting Protocol.

The NZAOA claims its Protocol is aligned with the Intergovernmental Panel on Climate Change’s (IPCC) pathways to delivering the Paris Agreement’s 1.5C target with little to no overshoot.

Of the businesses with 2025 targets to reduce financed emissions, the least ambitious target is a 22% reduction and the most ambitious is for 32%. For 2030, the lowest targeted reduction is 40% and the highest is 60%.

The Alliance stated in 2021 that it expects its members to reduce portfolio emissions by a minimum of 25% by 2025. Should there be reductions similar to those recorded this time around in the coming two years, this vision will not be realised. An exponential uptick in the rate of portfolio decarbonisation will be needed.

“Alliance members are making solid progress towards achieving their 2025 emissions targets, showing that, step-by-step, the crucial long-term transition to achieve 1.5C can be implemented.” Said NZAOA chair Gunther Thallinger.

“As we head towards at least 2.4°C warming with current climate pledges, we are at a pivotal moment to strengthen efforts for system-wide transformation. Alliance members act by implementing their intermediate targets. We call on others to do the same.”

Shifting investment

As well as tracking an uptick in the number of firms setting interim financed emissions targets in general, the NZAOA has recorded an increase in members setting sub-portfolio targets. The number of members increased from 41 last year to 67 this year.

Moreover, the Alliance has seen an increase in members setting targets to increase their investments in climate solutions. “Almost all” Alliance members now have such a commitment and, collectively, they have cumulatively invested $380.6bn in these spaces.

The most popular choices of climate-related investments at the moment are renewable energy and low-carbon buildings.

The report from the NZAOA came as the UN-backed Net-Zero Banking Alliance welcomed its first member from Pakistan, HBL. This initiative represents more than 130 banks which collectively account for more than 40% of global banking assets. It requires members to design, set and achieve credible science-based targets aligned with 1.5C.

HBL also became on official signatory to the UN Principles for Responsible Banking.

Related article: Are major asset managers greenwashing with their net-zero targets? ShareAction thinks so