Stockholm (NordSIP) – The Net-Zero Asset Owner Alliance (NZAOA) announced its 88 members, representing US$9.5 trillion in assets under management (AUM), had achieved average reductions in absolute financed greenhouse gas emissions of at least 6% annually, consistent with the IPCC’s 1.5°C pathways. Twelve¹ of these organisations come from the Nordic region.
The announcement, accompanying the publication of the NZAOA’s Fourth Progress Report was published on the eve of the COP29 meeting due to take place in Baku, Azerbeijan between November 11th and November 22nd, and was taken as an opportunity to set an example of what can achieved when investors commit to sustainable goals.
The UN-Convened Net-Zero Asset Owner Alliance (the Alliance) is a member-led initiative of institutional investors committed to transitioning their investment portfolios to net-zero green/house gas (GHG) emissions by 2050. The Alliance members were the first in the financial industry to set intermediate targets (aligned with the Paris Agreement schedule) and they report on their progress annually. The Alliance is convened by UNEP FI and PRI, and is supported by WWF and Global Optimism.
“Despite significant advances in asset owner portfolio decarbonisation, the pace of transition in the real economy remains insufficient, with global emissions continuing to rise each year,” Wendy Walford, Head of Climate Risk at The Legal & General, and upcoming Policy track co-lead for the NZAOA commented on this occasion.
Setting Portfolio and Sub-Portfolio Targets
On the targets front, NZAOA noted that 81 members (AUM of US$ 9.4 trillion, equivalent to 98.9% of the Alliance’s total AUM) have now set intermediate decarbonisation targets. 79 members setting targets have chosen to set sub-portfolio targets, which cover 48% (US$4.3 trillion) of members’ total AuM.
Portfolio coverage is up from 42% in the previous year, demonstrating the growing robustness of the latest and most comprehensive protocol. Sub-portfolio target coverage is expected to increase further once recently-added private assets are phased in.
On average, members targeted a reduction of 26% by 2025 for bonds, equities, real estate, and infrastructure. These reductions are aligned with the Paris Agreement and the IPCC Sixth Assessment Report pathways for achieving net zero greenhouse gas (GHG) emissions by 2050.
The 12 new members that have set their targets for the first time in 2024 have all set both their sub-portfolio and climate solution investments targets, together with mandatory engagement targets.
Nordic Asset Owners’ Goals
NZAOA publishes summaries of the goals of individual institutional investors. While Denmark is overrepresented with a total of seven members¹, another three come from Sweden and two other come from Norway. Denmark is represented by AkademikerPension, Danica Pension, Industriens Pension, Laegernes Pension, P+ Pension Fund for Academics, PensionDanmark and PFA. Alecta, AMF and Folksam represent Sweden. Nordea Life & Pension and Storebrand represent Norway. Members have used the four-pronged framework set out in the Alliance’s Target-Setting Protocol – requiring them to set an engagement target, and at least two out of three of either sub-portfolio, sector or climate solution investments targets.
According to NZAOA, Denmark’s AkademikerPension aims to reduce GHG portfolio emissions by 26.8% by 2025, while Danica Pension targets a 15% and 35% reduction (depending on the sector) for scope 1, 2, and 3 emissions in energy, supply, transport, steel, and cement sectors by between by 2025 (base year: 2019). For its part, Industriens Pension has set itself the goal of lowering the climate footprint for its listed equities, corporate bonds and directly owned properties by 29% by 2025. The information provided by the NZAOA suggests that Laegernes Pension has more readily available detailed goals, with the Danish asset owner aiming to reduce the portfolio carbon intensity by 25% for listed equity, by 30% for listed corporate bonds, and by 55% for real estate assets by 2025 (base year: 2019), while also aiming for 15% of its investment portfolio (AuM) to be invested in line with one or more of the six environmental objectives of the EU taxonomy.
Still in Denmark, P+ Pension Fund for Academics aims to reduce carbon footprint of the investment portfolio by 30% by 2025 (base year: 2019) and invest 15% of total assets in a “climate-friendly” manner by 2030. PensionDanmark‘s targets look to decrease the climate footprint of listed equities and corporate bonds portfolios by 45% by 2025 while reducing the scope 1, 2 and 3 emissions within Oil and Gas (by 20%), Utilities (by 35%), Cement (by 10%) and Shipping (by 15%), by 2025. PFA targets a 29% reduction of its portfolio carbon footprint by 2025.¹
From Sweden, Alecta aims to reduce scope 1 and 2 emission intensity in listed equity and corporate bonds by 25%, and in directly owned real estate by 50% by 2025. AMF Pension seeks to decrease its “carbon budget” by 25% by 2025 (base year: 2019). Folksam targets require it to achieve a 29% reduction in GHG emissions across the equities, corporate bonds and real estate portfolios by 2025, while ensuring that at least 50% of the 86 largest emitters in its portfolio will have developed science-based climate targets by 2025.
Lastly, from Norway, Storebrand targets a 15% of total AuM investment in climate solution companies by 2025 and a reduction of emissions in the total equity, corporate bond and real estate investments by 32% by 2025 (base year: 2018). Nordea Life & Pension (Norway) aims to reduce emissions intensity of assets in residential real estate, shipping, agriculture, motor vehicles, power production, and oil and gas by 30%–70%, depending on the sector, by 2030. At sub-portfolio level, Nordea Life & Pension’s target is to reduce the carbon footprint for listed equity, corporate bond and real estate portfolios by at least 25 per cent by 2025 (base year: 2019).
Setting an Example
On the occasion of the report’s publication, “asset owners urge policymakers to follow through on their Paris Agreement pledges and implement policies necessary to further the net-zero transition,” not least, “policies to support further portfolio decarbonisation and the net-zero transition in the wider economy.”
“The Alliance sets a powerful example for meaningful progress. To maintain momentum, governments must implement bold climate policies and define concrete sector-based and investible transition plans with short-term targets to meet their Paris commitments,” Günther Thallinger, Board Member of Allianz SE and Chair of NZAOA, concludes.
“As long-term investors, we see the difference between governments’ climate commitments and current policies as unsustainable, and a decisive shift in policy is required to align policy frameworks with the net-zero transition more widely. Governments have the tools – such as carbon pricing – to meet their Nationally Determined Contributions (NDCs), as highlighted in the Alliance’s white paper earlier this year,” Walford concludes.
¹Although Denmark’s PKA is still listed as a member on the NZAOA website, it actually left the Alliance in September 2024. According to the NZAOA, PKA goals included a reduction scope 1 and 2 carbon intensity of listed equities, corporate bonds and real estates portfolios by 29% by 2025, while ensuring 15% of AUM is in green investments by 2025 and 20% by 2030. Despite having left the NZAOA, Nicholas Rindahl, Head of Press at PKA, told NordSIP that “our ambitions and targets in the area of climate action and CO2-reduction remain the same”. PKA will pursue its net-zero goals via the Institutional Investors Group on Climate Change (IIGCC) instead. Despite reports that AkademikerPension and Laegernes Pension were reviewing the relevance of their NZAOA membership, it appears that these two Danish institutional investors remain members of the Alliance.
