The head of the Net Zero Asset Owner Alliance (NZAOA) has said it is not necessary for investment managers to have net zero commitments, in the latest sign that expectations for the asset management community are evolving.
Günther Thallinger, a board member at Allianz and chair of NZAOA, told IPE that it was “really understandable” that asset managers wanted to provide different services to different clients, some of whom are not seeking to align with a low-carbon economy.
He described entity-level commitments – such as those made through the Alliance’s sister organisation for asset managers, Net Zero Asset Managers initiative (NZAM) – as “helpful”, because they make it clear where two entities are aligned in their climate goals.
“But if an asset manager has no such commitment, or if they’ve now changed away from a commitment, we will still insist on the service we need – it’s not relevant whether an asset manager has a commitment or not.”
Since Vanguard left NZAM and ditched its net-zero commitment in 2022, other managers have been under pressure to follow suit, particularly in the US, where net zero goals have become highly politicised over the last two years.
So far, most have retained their entity-level pledges, with a handful choosing to withdraw from engagement initiative Climate Action 100+ instead.
But there are concerns that if the US moves further to the right after November’s elections, more managers will abandon their public net zero goals.
Speaking to IPE earlier this year, two other NZAOA heads called on asset managers to make sure their climate commitments were taken seriously at the top levels of the organisation.
Patrick Peura, who runs engagement activities for both Allianz and NZAOA, noted some managers were failing “to integrate their climate objectives into their broader business strategy”.
In the same interview, Jake Barnett from US pension fund Westpath warned that, if managers ditched their commitments, “asset owners can take that into account when they’re awarding mandates”.
“The development we still need to see to cover more of the economy is on the asset owner side”
Günther Thallinger
But IPE has asked a number of large, climate-focused European pension funds in recent weeks whether managers’ public commitment to net zero would influence their next mandate decisions, and all said no. None would go on the record.
The shift appears to reflect a change in understanding about how accountable asset managers can be held for driving decarbonisation.
Last year, Nathan Fabian, a senior figure at the Principles for Responsible Investment (PRI), landed himself in hot water when he told a conference audience: “The idea that a manager with a corporate ownership, who serves millions of different individual clients, can set its own 2050 [net zero] target and faithfully implement that – supposedly on somebody’s behalf – was frankly never going to work.”
The PRI helps convene NZAM, NZAOA and CA100+.
The organisation recently overhauled its approach to membership to encourage entities to be more explicit about their approach, partly to acknowledge the different levels of agency that managers and owners have when it comes to setting and pursuing sustainability goals.
“Net zero is very much an asset owner story,” said Thallinger. “Asset owners need to take more responsibility for their climate impact, and they need to come up with net-zero commitments.”
NZAOA has 88 members, but Thallinger said that number “should be 150”. “The development we still need to see to cover more of the economy is on the asset owner side,” he continued, adding that “regulatory steps will also be needed” if asset owners don’t step up voluntarily.
“Governments need to implement their NDCs, and they will need to require asset owners to support them,” Thallinger explained, referring to Nationally Determined Contributions, the climate goals underpinning the Paris Agreement.
“If investors have trouble working towards net zero, they will have trouble supporting the NDCs, and governments will have to use the levers they have to deal with that.
“One of them may be that they [introduce] certain regulatory requirements.”
Thallinger added that asset owners can create demand for managers to do more on climate by committing to net zero themselves, and collaborating through bodies like NZAOA.
“We have examples of asset managers actually providing dedicated net-zero-oriented services for the first time as a result of our engagement,” he said.
NZAOA will next month release an overview of the progress it has made since its inception five years ago.
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