Climate commitments for asset managers

As awareness of the climate crisis grows, it’s no surprise that more and more institutions are addressing climate commitments. Research published last month by Cerulli Associates revealed that just a third of US institutional asset owners have formal net-zero commitments, but 29% indicate they plan to add them within two years. To compare, 43% of European institutional investors have such commitments, and an additional 49% plan to add them in the near future. In Asia, the figures are 44% and 31%. 

Regardless of these numbers, the rate of adoption within the US is encouraging, as most institutional investors have only recently dabbled in sustainable products. 

Growing demand

As investment consultants and clients increasingly ask about climate proposals, answers founded on robust data are needed.

Cerulli Associates Net-Zero Investment paper indicated that asset managers have had to be quick to respond to growing demand, with 57% saying that institutional asset owners are the primary driver of demand for net-zero strategies.

Industry competition is also a big motivator, with 39% of managers saying they feel pressure to offer net-zero strategies because their peers are doing so. Further, more than a third also said that non-governmental organisations have played a role in getting them to explore net-zero commitments. 

Though the US is shown to lag on European counterparts, last month’s passing of The Inflation Reduction Act (IRA) shows further promise. Projected to reduce US climate pollution by roughly 40 percent by 2030 compared with 2005, it will enable investment and innovation en route to the current US Paris Agreement target.

Engaging on detail of transition plans

There’s some way to go before net-zero becomes the norm, but it’s encouraging to see the progress that’s been made on the journey so far. As more and more asset managers answer the call for climate action, we can only hope that the momentum continues to build until net-zero is no longer a voluntary commitment but a mandatory requirement. 

Until that time, both data and engagement are necessary for aligning portfolios with climate goals. Asset managers have a vital role to play at the forefront of driving real world change, designing solutions and influencing decision-making to help clients navigate the low carbon transition. 

SI Engage will help you plan, track and report on climate and wider environmental impact across your portfolio companies with ease.

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