Mike Philbrick discusses Vanguard ETF
The world’s largest asset managers have joined a group of investors committing to cut the net greenhouse-gas emissions of their portfolios to zero.
BlackRock Inc. and Vanguard Group Inc. are among 43 investment firms managing more than US$22.8 trillion of assets that are joining the Net Zero Asset Managers initiative, according to a statement Monday. By signing up, the money managers are pledging to support efforts to limit global warming to 1.5 degrees Celsius by targeting net-zero emissions by 2050 across all their holdings. They also will set a public goal for the proportion of their assets that in 2030 will be on course for net zero.
Eliminating emissions is becoming a greater focus for investors as activists, clients and regulators push them to move from talk to action and use their influence and resources to hold companies to account. And there is a growing urgency to act since scientists have said emissions need to drop by about 50 per cent by 2030 and reach net zero by the middle of the century to avoid the most catastrophic impacts of climate change.
“Climate change represents a long-term, material risk to our investors’ portfolios,” Vanguard Chairman and Chief Executive Officer Tim Buckley said in the statement. “As a steward of our clients’ assets, we recognize the crucial role we and others play in driving real progress on climate risk over time.”
Asset managers’ 2030 targets should be commensurate with the 50 per cent global reduction in CO2 that scientists have specified as necessary to limit warming to 1.5 degrees. They also should report annually on their progress toward the recommendations of the Task Force for Climate-related Financial Disclosures. That includes setting an action plan that will be monitored by investor climate groups.
Money managers can contribute to a cooler planet by pressing the companies they own to do more to cut emissions and redesigning their portfolios to support green businesses. While the asset-management industry is under pressure to contribute to the low-carbon transition, BlackRock and Vanguard have faced particular criticisms from climate campaigners who say their large holdings of fossil-fuel companies make them complicit in warming the world, while their track record on proxy voting hasn’t signaled a sufficient desire to act on climate change.
“Helping investors prepare their portfolios and capture investment opportunities on the path to net zero is one of our greatest responsibilities,” BlackRock Chairman and CEO Larry Fink said in the statement.
The Net Zero Asset Managers initiative was started last year with Legal & General Investment Management and UBS Asset Management among its founding members. With the additions, the group now represents US$32 trillion of assets, accounting for more than a third of the total global funds under management, according to the statement.
Brookfield Asset Management also joined the initiative, marking a shift after its Vice Chair Mark Carney came under fire last month for claiming its portfolio was already net zero, while continuing to invest in fossil fuels. The controversy hinged on Carney’s use of “avoided emissions,” in which a company takes credit for refraining from high-polluting actions.
“It was not our intention to suggest that we have achieved our objectives in carbon reduction,” a spokeswoman for the Toronto-based company said in an emailed statement. “Brookfield is fully committed to the goal of achieving net zero GHG emissions by 2050.”
Brookfield will measure and report its emissions according to the standards set by the Greenhouse Gas Protocol, she said. It will also set interim targets for 2030 for a proportion of assets to be managed in line with achieving net zero emissions by mid-century.
Other new signatories include Aberdeen Standard Investments, Allianz Global Investors, Jupiter Asset Management, Lazard Asset Management and Storebrand Asset Management.
“The transition to net-zero carbon emissions is imperative, and we have a responsibility to work together as an industry and a society to tackle climate change,” said Andrew Formica, CEO of Jupiter Asset Management.