Impact

This week, we saw the Net Zero Asset Managers Initiative triple in size - now, over $32 trillion (36% of the global total) are managed by firms committed to the goal of net zero greenhouse gas emissions by 2050 or sooner.

Why did some of the world's largest investment firms sign on alongside long-time leaders in sustainable investing? Because their clients - and the economy as a whole - demand it. And now, as asset managers expand the net zero portfolio solutions available, more asset owners who share the goal of a just transition will be able to confidently commit to net zero target dates as well.

Endowments Taking Action

New commitments we've seen already in 2021:

University of Michigan

The University of Michigan will immediately shift its natural resources investments to focus more on renewable energy, stop investing in funds primarily focused on certain fossil fuels and discontinue direct investments in publicly traded companies that are the largest contributors to greenhouse gases. The new investment strategies are part of a commitment approved by the Board of Regents on March 25 to ensure the university’s investment portfolio reaches a “net-zero” carbon footprint by 2050, likely making it the first public university in the country to take this step to address climate change.

Ontario Teachers' Pension Plan

The Ontario Teachers' Pension Plan is committing to achieving net-zero greenhouse gas emissions by 2050. Next steps for Ontario Teachers include establishing concrete targets for portfolio emissions and increased investments in climate solutions, and physical risk assessments of direct holdings. The organization will also partner with other climate action advocacy groups, and ask portfolio companies to manage emissions and report annually on efforts to achieve net zero emissions by 2050.

Leading endowments who took action in 2020:

• David Rockefeller Fund
• Harvard University
• Stanford University
• University of Cambridge
• University of Manchester
• University of Oxford
• World Resources Institute

How Progress Was Made

As a result of the growing evidence that our economy will transition out of carbon over the next 10-30 years, demand for sustainable investing has passed a tipping point. Asset owners have gotten louder and more ambitious in their calls for investment managers to put their assets to use building that carbon neutral economy, in a way that works for all people (unlike the carbon-heavy economy that was built to work better for wealthy, white, and/or male people than for everyone else).

At the same time, asset managers who are investing in a just transition have the results to show that a Net Zero trajectory is not only possible, but profitable. The track record of fossil fuel free investing strategies and more deliberate use of shareholder engagement tools have made the idea of a Net Zero Portfolio feel more achievable to a wider range of investors.

What’s Next?

One of our highest priorities in the next steps of this work is to ensure that Net Zero commitments are made through a justice and equity lens. As we shift investments toward renewable energy and the business models of a carbon neutral future, we must ensure that people of diverse identities and experience are making investment decisions, and that our investments address past environmental racism, avoid extractive practices, and better serve low-income communities and communities of color.

We expect the Net Zero Asset Managers Initiative, Net Zero Asset Owners Alliance, and other field-building groups to support the development of clear targets, innovative strategies, and robust measurement tools.

IEN will be doing our part by supporting a Net Zero Endowments Initiative among our members - stay tuned for an announcement soon about the leadership and direction of this group. We are including a variety of learning and action opportunities around Net Zero Endowments within our Climate Action Pursuit program. If you register now to participate in the June, October, and December milestones of the Climate Action Pursuit, you'll also get access to recordings of this recent session on setting a commitment, this session on net zero options across asset classes, and this Q&A with the Net Zero Asset Owners Alliance.