The march toward net zero remains a daunting trek for investors.
Eighteen months ago, we mapped considerations for the industry’s forward path through the unfolding low-carbon transition (see Transitioning to Net-Zero Investment, April 2021). At the time, the Net-Zero Asset Owner Alliance had just added five members to their ranks, bringing the overall number of signatories to 42 owners, with a total of $6.6 trillion in assets under management. It was a crucial tipping point for net zero.
Since then, macroeconomic conditions and the political landscape have shifted dramatically. Rising energy prices and regulatory scrutiny of ESG and climate commitments have created a more challenging environment for investors aiming to decarbonize their portfolios. And yet, the number of new net-zero commitments keeps ticking up, and many of our clients continue to make excellent progress implementing the ones they have already made.
In this paper, we present 11 key issues we believe asset owners should take into consideration right now—as well as the significant challenges that come with them—based on feedback from numerous well-informed clients and industry experts. The discussion spans all phases of implementing a net-zero commitment—from initially codifying it, to sharing progress with key stakeholders—and offers food for thought on navigating next steps.
Clearly these are still early days. This transition will take time and diligence. And while challenges abound, we remain encouraged by the simmering urgency among investors and companies to meet their climate goals and ultimately reduce emissions and the risks they pose to their portfolios, businesses and the planet.