Pension funds, insurers commit to carbon-neutral investment portfolios by 2050

In one of the boldest actions yet by the world’s largest investors to decarbonize the global economy, an alliance of the world’s largest pension funds and insurers – responsible for directing more than US$ 2.4 trillion in investments – has on Monday September 23. 2019 committed to carbon-neutral investment portfolios by 2050.

This commitment by the newly launched, United Nations-convened Net-Zero Asset Owner Alliance was announced today at the UN Secretary-General’s Climate Action Summit, which brought together governments, companies and civil society to strengthen commitments and accelerate the implementation of the Paris Agreement on Climate Change.

The Net-Zero Asset Owner Alliance is an example of investors stepping up to protect people and planet with the knowledge that companies that transform their businesses to deliver a low carbon economy will benefit most from the opportunities presented by climate change.

Inger Andersen, Executive Director of the UN Environment Programme (UNEP) said, “There are no short-cuts to decisive climate action. We need to take a long-term view. I applaud the leadership of the investors in this Alliance. Their commitment sends a strong signal that financial markets and investors are listening to science, and moving us to a path of resilience and sustainability.”

Asset owners – so called because they are the principal holders of retirement savings or are insurance companies investing their customers’ premiums – represent some of the largest pools of capital on the planet. Their investment portfolios are highly diversified and exposed to all sectors of the global economy.

Concerned about the disruptive impacts that unabated climate change will have on societies and economies, now and in the future, responsible asset owners are powerful allies in global action to fight climate change and limit the rise in global temperature to no more than 1.5°C warming.

As long-term investors who must look far into the future to fund their liabilities, asset owners are keen to ensure that the global economy prospers, that climate-related risks are addressed, and that opportunities to invest in a cleaner tomorrow are captured.

The Alliance was initiated by Allianz, Caisse des Dépôts, La Caisse de dépôt et placement du Québec (CDPQ), Folksam Group, PensionDanmark and Swiss Re at the beginning of 2019. Since then, Alecta, AMF, CalPERS, Nordea Life and Pension, Storebrand, and Zurich have joined as founding members.

Convened by UNEP’s Finance Initiative and the Principles for Responsible Investment, the Alliance is supported by WWF and is part of the Mission 2020 campaign, an initiative led by Christiana Figueres, former Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC).

“Mitigating climate change is the challenge of our lifetime. Politics, business and societies across the globe need to act as one to rapidly reduce climate emissions. We, as asset owners, will live up to our responsibility and, in dialogue with the companies in which we invest, steer towards low-carbon business practices. We’ve already started and, by 2050, our portfolios will be climate neutral,” said Oliver Bäte, Allianz’s CEO.

The members of the Alliance will immediately start to engage with the companies in which they are investing to ensure they decarbonise their business models. Initiatives such as the UN Global Compact “Business Ambition for 1.5°C — Our Only Future” campaign will be a clear partner in mobilising corporations to commit to net zero emissions. The Alliance will also collaborate with other initiatives, such as the Investor Agenda, Science Based Targets initiative, Climate Action 100+, and the newly announced 2050 Ambition Alliance.

The members of the Alliance will hold themselves publicly accountable on their progress by setting and publicly reporting on intermediate targets in line with Article 4.9 of the Paris Agreement. By committing to transitioning their investment portfolios to net-zero greenhouse gas emissions by 2050, asset owners are significantly raising the bar for other investors, industry associations and, importantly, the global economy.

“The Net-Zero Alliance is the recognition that institutional investors collectively have an important role to play in fostering the energy transition the world needs. For investors like CDPQ, there are so many opportunities to earn commercial returns by investing in low-carbon solutions and to work with portfolio companies to decarbonize,” said CDPQ CEO, Michael Sabia. “Combined with the necessary changes in public policies, investors’ actions will induce real change in every sector.”

To have maximum impact, existing Alliance members actively encourage additional asset owners to join them in their quest to decarbonise investment portfolios and achieve net zero emissions by 2050.