Is Your Firm Ready for Net Zero?

Brian Helmes, Rebecca Dunkelman

The recent Intergovernmental Panel on Climate Change (IPCC) report confirmed that climate risk is accelerating, and the trajectory to limit average global temperature increases to 1.5° Celsius is off-track. This stark reality is a reminder that without bold and unified action by the asset management industry, achieving Net-Zero for assets under management by 2050 as a part of NZAMI (the Net-Zero Asset Managers Initiative) is doubtful. ‘Net zero’ broadly refers to the balance between the amount of greenhouse gases (GHG) produced and the amount of GHG removed from the atmosphere over a specified period. For asset managers who are not yet net zero signatories, the perception of non-commitment will soon become a real business risk.

The NZAMI has 273 signatories and USD 61.3 trillion in AUM across the globe (as of 31 May 2022), with defined commitments and goals from each to help achieve net-zero before 2050.  Similar net zero initiatives are also in place for asset owners, banking, and insurance institutions.

As a NZAMI signatory, organizations commit to:

  1. Collaborate with asset owners on decarbonization goals to reach net zero emissions by 2050 or sooner across all assets under management (AUM);
  2. Set interim targets for the proportion of assets to be managed in line with the goal of achieving net zero emissions by 2050 or sooner; and,
  3. Review interim targets at least every five years, with incremental increases on the proportion of AUM covered until 100% of assets are reached.

These commitments are fulfilled through a list of distinct actions, including, but not limited to:

  1. Providing asset owner clients with information and analytics on net-zero investing and climate risks and opportunities;
  2. Setting interim targets for 2030 consistent with a fair share of the 50% global reduction in CO2 ; and
  3. Publishing the Task Force for Climate-Related Financial Disclosures (TCFD)

With many European peers already signed up to net zero, North American asset managers should take notice now and consider how regulatory proposals such as the SEC’s proposed climate disclosure rules for public companies, and Canada’s reporting mandates on climate-related financial risks, will further accelerate pressure on organizations to commit to de-carbonization targets for their investment portfolios. Well-prepared organizations are conducting net zero business impact assessment now and considering how to strategically position themselves to take advantage of the opportunities net zero offers firms.

In particular, firms are asking themselves:

  • What exactly will we need to deliver to meet TCFD reporting requirements?
  • How will our strategic planning, governance, risk management and reporting processes need to evolve?
  • What operational changes will be required across the organization and what new data will we need to capture, analyze, and report on?
  • How are peer organizations assigning ownership and accountabilities?
  • What will our institutional clients signed up as net zero asset owner signatories require to meet their own net zero targets.

If you’re considering joining the Net Zero Initiative or would like more information on how Alpha can assist with your journey, please reach out to us.

About the Authors

Brian Helmes
Senior Manager

Brian is a Boston-based Senior Manager in Alpha FMC North America with over 15 years of diverse experience in financial services and consulting built over numerous years in industry and subsequent consulting engagements at leading global asset managers and government institutions. Brian also co-leads ESG research and advisory efforts for North America.

Rebecca Dunkelman

Rebecca is a Toronto-based Analyst in Alpha FMC North America. Rebecca has a breadth of experience supporting investment managers across a variety of engagements within the Distribution and M&A practice areas. Rebecca supports ESG research and advisory efforts for North America.