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FORWARD THINKING | – 3 Min

Our 10 commitments on the road to net zero

In this article:

    To tackle the effects of climate change, a shift to a low-carbon world is essential. Such a world – and its economy – require sustainable investments. In our 2019 Global Sustainability Strategy, we pledged ‘to make a substantive contribution to the low-carbon energy transition’. We have now reinforced this by signing up to the Net Zero Asset Managers initiative, a group of international asset managers supporting the goal of net zero GHG emissions by 2050 or sooner.  

    We believe the financial industry has an important role to play in the transition towards a net zero[1] future. As part of our efforts, we are making 10 commitments to achieving this goal. They cover:   

    • Investments: What is in our portfolios (what we invest in on behalf of our clients)
    • Stewardship: Our relationship with companies and other issuers whose securities we invest in, and policy makers
    • Operations: How sustainably we as an asset manager operate. 

    The commitments, which build on some 20 years of work on sustainable investing, can be seen as part of worldwide efforts to maximise the chance to limit global warming to 1.5°C by the end of this century. This requires that human-caused net emissions of CO2 fall by 45% by 2030 (as an interim step from 2010 levels) and reach net zero around 2050.[2]

    In doing its part, the financial sector, including asset managers, formed the Glasgow Financial Alliance for Net Zero in 2021. GFANZ now includes more than 550 major institutions from over 50 countries. As a GFANZ member, and under the Net Zero Asset Managers initiative, we are committed to publishing a comprehensive net zero roadmap and to review any interim targets at least every five years. We also commit to helping asset-owner clients to achieve their net zero goals.

    We want to be realistic about what we can do and when we can do it. Initially, our commitments will cover only about half of the investments in our overall portfolio, or EUR 250 billion[3] of our assets under management. We are focusing on investments in listed (equities and corporate bonds.

    We will extend our commitments to include sovereign and private markets investments in the next phase.

    Investments, stewardship, operations

    Our commitments fall into three categories. Each plays an important role in realising our net zero ambition in a credible way. Our investments and stewardship commitments in particular are interlinked and each will benefit from the achievement of the other.

    INVESTMENTS: The objective is to shift away from ‘the brown’ towards ‘the green’. In between, we will focus on investing in companies that are aligning with net zero and decarbonising their businesses

    STEWARDSHIP: Through engagement and voting as a shareholder, we encourage companies to set, adopt and implement net zero goals by 2050 or sooner. We also encourage policymakers to increase their ambitions for country-level net zero roadmaps

    OPERATIONS: To be credible in calling for change, we will walk the talk ourselves – that is, we will reduce our own carbon footprint and report on our progress in achieving our 10 commitments.

    Ensuring long-term sustainability

    These commitments build on work done during some 20 years. We have been actively involved in ESG investment since the launch of our first SRI[4] fund in 2002. In 2015, we pledged to contribute to achieving the Paris Agreement goals. In 2019, we formalised our approach to sustainable investment with our Global Sustainability Strategy, in which we vowed ‘to make a substantive contribution to the low-carbon energy transition’. 

    With this net zero roadmap, we are embarking on the next stage of our journey by making net zero emissions by 2050, or sooner, the goal for our investment, stewardship and operational activities. In phases, over the coming decades, we are taking action to become the ‘net zero asset manager’ for a changing world, underscoring our long-standing focus on sustainability.

    We encourage you to read more about our approach in the summary publication Net zero: 10 commitments, or our white paper Committed to climate: Our net zero roadmap.

    References

    [1]  According to the IPCC, net zero, or carbon neutrality, is reached when human activities result in no net effect on the climate system. This requires balancing residual emissions with emission (carbon dioxide) removal.

    [2] Source: netzeroclimate.org/what-is-net-zero  

    [3] As at June 2022  

    [4] Socially responsible investment

    Disclaimer

    Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
    Environmental, social and governance (ESG) investment risk: The lack of common or harmonised definitions and labels integrating ESG and sustainability criteria at EU level may result in different approaches by managers when setting ESG objectives. This also means that it may be difficult to compare strategies integrating ESG and sustainability criteria to the extent that the selection and weightings applied to select investments may be based on metrics that may share the same name but have different underlying meanings. In evaluating a security based on the ESG and sustainability criteria, the Investment Manager may also use data sources provided by external ESG research providers. Given the evolving nature of ESG, these data sources may for the time being be incomplete, inaccurate or unavailable. Applying responsible business conduct standards in the investment process may lead to the exclusion of securities of certain issuers. Consequently, (the Sub-Fund's) performance may at times be better or worse than the performance of relatable funds that do not apply such standards.

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