The UN-convened Net Zero Asset Owners Alliance (NZAOA) is a group of global asset owners that have committed to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050. The alliance’s 74 members represent a total of US$10.6trn asset under management, a significant portion of the financial sector, and have committed to:

  1. Transition their investment portfolios to net-zero GHG emissions by 2050 consistent with a maximum temperature rise of 1.5-degrees
  2. Establish intermediate targets every five years
  3. Regularly report on progress

Members include the following:

A grid of some NZAOA member logos

The asset owner industry owns the largest collective wealth of any sector but typically employs asset managers to invest and manage their assets. Whilst most companies are under pressure to deliver short-term results, climate change requires adopting a long-term mindset as its effects are likely to be felt over multiple decades. Asset owners are in a unique position to influence change in the global economy as they have long-term investment horizons and liabilities and have a huge influence over asset managers.

As such, the efforts of the members of this alliance could have a huge impact. The NZAOA has released its ‘Target Setting Protocol for Asset Owners’ which provides guidance to its members on setting targets for 2025 and reporting against these. The Target Setting Protocol is very closely aligned to the SBTi’s guidance for Financial Institutions, but providing an angle specific to the unique position asset owners operate in.

The Target Setting Protocol sets out guidance for members to set interim 2025 targets on four key pillars:

  1. Engagement targets
  2. Sector-targets
  3. Sub-portfolio emission targets
  4. Financing transition targets

This sector-specific guidance is welcome, and the emphasis on short-term targets reduces the risk of delayed action. However, there are areas where the guidance is vague, and consequences of inaction are not clearly defined. For example, engagement targets are not clearly linked to escalation strategies, and the protocol shies away from escalation strategy recommendations. As such, the potential impact of the NZAOA to enable large-scale decarbonisation of asset owner’s portfolios is highly dependent on the individual asset owner’s commitment. Nevertheless, the target setting protocol provides a strong foundation upon which to develop this and membership to the NZAOA creates a forum for collaboration within the sector.

Avieco can support clients in aligning to the membership requirements, calculating the GHG emissions of their portfolios using the guidance set forth by the PCAF (Partnership on Carbon Accounting Financials) and monitoring progress against emission targets.

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