The Net Zero Asset Owners Alliance (NZAOA) recently issued a call for comment to respond to the urgent need to align carbon neutrality methodologies.
Launched in early 2019, the NZAOA gathers a set of climate-conscious international institutional investors, namely Allianz, Caisse des Dépôts, La Caisse de dépôt et placement du Québec (CDPQ), Folksam Group, PensionDanmark, Swiss Re, Alecta, AMF, CalPERS, Nordea Life and Pension, Storebrand and Zurich.
NZAOA members share the commitment to transitioning investment portfolios across all asset classes to net-zero emissions by 2050 , this with a view to limiting to +1.5°C global temperature rise in 2100 from its pre-industrial level.
During the first three years of the Alliance, all asset owners will have to:
- Carry out and disclose portfolio baseline assessments;
- Develop climate strategies & action plans, including trajectories;
- Disclose first quantitative report by December 2023.
For all individual members to fulfill these commitments, the Alliance is currently looking to align carbon neutrality methodologies. The underlying objective of the abovementioned call for comment is to foster methodology and data robustness, strength and transparency. As part of the call for comment, the investors are now looking for confidential feedback on their expectations until 1 May. Data and service providers, NGOs, other investors, government representatives, academia and civil society are encouraged to engage, and comments will inform the alliance’s work on topics such as target-setting guidance, reporting, methodological uses, and public progress reports.
The circulated expectation document outlines six “core principles”, which include a number of “must haves”:
- Impact: The methodology must provide investors / users with a quantified view of the impact of their investments on climate change.
- Forward-looking: The methodology must provide investors / users with a forward-looking metric, at five-year intervals through to 2050.
- GHG footprinting: GHG emissions footprinting must form the basis of this methodology; GHG Protocol Scopes 1 and 2 must be included.
- Portfolio alignment / investment “temperature”: The methodology must deliver a “core” metric expressed in terms of a forward-looking carbon KPIs (both relative to production and absolute) as well as temperature KPI
- Science-based decarbonization: The methodology must be based on adequate IPCC scenarios and seek to promote “real world impact” by encouraging investment decisions that lead a decarbonization of the economy.
- Portfolio management: The methodology must allow to compare single companies in a given sector, hence, it must be able to produce metrics and KPIs at individual issuer and portfolio levels but also per sector.
This call for comment marks NZAOA members’ first concrete step towards the achievement of their commitments to transitioning investment portfolios to net-zero emissions by 2050. It could also incentivize other investors to transition their own investment portfolio, providing them with resources and a shared methodology.