Engaging on “net zero” with asset managers
There are significant differences in how managers are approaching the challenge.
The Net Zero Asset Manager (“NZAM”) initiative was launched in December 2020 and brings together international asset managers committed to aligning their investment activities with the goal of net zero emissions by 2050 or sooner. Since the launch, the economic and political landscape has shifted dramatically. Russia’s invasion of Ukraine led to a surge in energy prices and prompted many countries to focus on energy security, accelerating the energy transition. At the same time, the politicisation of climate change, particularly in the US, has made net zero an increasingly challenging topic for investors to navigate.
To better understand how asset managers are navigating the challenges of decarbonising portfolios, we engaged with 21 managers that we invest with. Together, these organisations are responsible for £27 trillion of assets under management (“AUM”). 77% are signatories to the NZAM initiative.
We share below the key takeaways from these engagements.
- Where a manager believes their fiduciary duty lies is the biggest factor in determining how much AUM, if any, they are willing to commit to net zero. We have seen a clear divide between managers operating in the US and Europe.
- Educating clients is key. Managers need to be able to provide clients with the tools, data and resources to understand climate risks in order to help them make informed decisions on their investment preferences.
- Managers need to be able to give clients products aligned with net zero in the form that they prefer.
- Engaging with underlying companies is the preferred tool for decarbonising portfolios. We encourage managers to focus on targeting the top emitters and putting engagement policies in place with clear, time-bound targets.
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This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
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