Money Managers Pledge to Hit Net Zero. Now the Hard Part
(Bloomberg) -- In the past week, Macquarie Asset Management, the New York State Common Retirement Fund and a group of 30 fund management companies have come out with statements saying they’re serious about getting the world to net-zero emissions.
The announcements are welcome news, but now comes the hard part: How will all these investment firms and pension plans put their words into action, and how long will it take?
“It’s fair to be skeptical,” said Kyle Harrison, a New York-based analyst at BloombergNEF. “To get results, investors are going to have to force their portfolio companies to set net-zero targets of their own, or dramatically shift their investment strategy toward less emissions-intensive companies.”
BlackRock Inc. has been among the most outspoken, with Chief Executive Officer Laurence Fink saying at the start of 2020 that companies must step up to tackle climate change. Since then, the world’s largest asset manager has been criticized for failing to support enough shareholder resolutions pressing corporations to do just that.
Last week, BlackRock recommitted to do what it promised to do back in January.
“You have to use your influence and the way you vote on resolutions and interact with company management teams to make sure your voice is heard,” said Martin Stanley, head of Macquarie Asset Management, which oversees about $400 billion and ranks as the world’s biggest manager of infrastructure funds.
Macquarie differs from firms like BlackRock in that it’s often the controlling shareholder of the assets it owns. The money management firm said last Wednesday it will have net-zero business plans that are aligned with the goals of the Paris climate accord by the end of 2022. To achieve this, it pledged to measure greenhouse gases from all portfolio companies, find ways to reduce emissions and develop business plans that contribute to a net-zero economy by 2040, or sooner.
The Net Zero Asset Managers initiative, introduced last week, includes a group of 30 asset managers overseeing a combined $9 trillion. The initiative supports efforts to limit global warming by requiring carbon-neutral investment portfolios by 2050 at the latest. The consortium is similar to the Climate Action 100+, an investor organization that requires portfolio companies to lower their emissions (or risk losing investment) and supports the Taskforce on Climate-related Financial Disclosures, or TCFD.
TCFD mandates that companies disclose climate-change risks and opportunities in annual reports, making it easier for investors to assess their exposure to various environmental challenges.
And then there’s New York’s $226.4 billion pension fund, which said last week it will take four years to finish reviewing all its fossil-fuel holdings and related businesses. The fund said it’s in the process of evaluating nine oil-sands companies, and plans to develop minimum standards for investments in shale oil and gas. It promised to do the same for the oil majors, as well as related equipment, transportation and storage companies. Only after finishing the reviews will the fund assess whether companies are on a viable path to a low-carbon economy, according to Comptroller Thomas DiNapoli.
“Divestment is a last resort, but it is an investment tool we can apply to companies that consistently put our investment’s long-term value at risk,” he said.
Sustainable Finance in Brief
- Despite all the pledges by the financial industry, banks keep funneling billions of dollars into polluting energy projects.
- BlackRock announces that it’s going to push companies to improve racial diversity in 2021.
- Climate activist group ShareAction is urging European bankers including Barclays as well as corporate emitters to promise initial steps toward net-zero financing.
- Ray Dalio’s Bridgewater hedge fund firm says it’s moving into sustainability investing.
- Fidelity is calling for quick action to help seafarers stranded by the coronavirus pandemic.
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