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Investors make commitment to net zero emissions by 2050

There was unparalleled surprise in New York when a powerful alliance of UN-backed asset owners announced it will drive it’s portfolio companies to carbon neutrality by 2050. This could mean a fundamental change in capital markets.

At the UN Climate Action Summit 2019 in New York in September, it grew clear that global efforts to protect the climate are still too often made up of too many hollow words and far too few effective actions. With the measures taken so far, the world will be unable to avert the ecological catastrophe that has already begun. On the stock markets, decarbonisation (actually, ‘de-fossilisation’ would be a more apt description) has been an issue for quite some time. Sometimes you get the impression the economy has made bigger strides than politics.

In one of the boldest attempts yet by the world’s largest investors to decarbonise the global economy, an alliance of leading pension funds and insurers – holding the purse strings on more than US$2.4 trillion in investments – was launched in New York. The “UN-convened Net­Zero Asset Owner Alliance” announced it is committed to carbon-neutral investment portfolios by 2050. The club was initiated by Allianz, Caisse des Dépôts, La Caisse de dépôt et placement du Québec (CDPQ), Folksam Group, Pension Danmark and Swiss Re at the beginning of 2019. Since then, Alecta, AMF, Calpers, Nordea Life and Pension, Storebrand and Zurich have joined as members.

The Net-Zero Asset Owner Alliance is an example of investors “who have understood that profits alone are not a sustainable strategy and need to be placed in a broader context. Climate and environmental risks will sooner or later mutate into capital risks,” says founding member Oliver Bäte, CEO of insurance giant Allianz SE.

The members of the Alliance will immediately start engaging with the companies where they’ve invested to ensure they decarbonise their business models. Initiatives like the UN Global Compact “Business Ambition for 1.5°C – Our Only Future” campaign will be a clear partner in mobilising. The companies in the Alliance say they will hold themselves publicly accountable on their progress by setting and publicly reporting on intermediate targets in line with Article 4.9 of the Paris Agreement. By committing to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050, asset owners are significantly raising the bar for other investors, industry associations and – most importantly – the global economy. It’s a megatrend that no one on the stock markets can afford to ignore.

Originally published in European Biotechnology Magazine, Autumn 2019 edition