24 September 2021 / Opinion
Will COP26 lead to consolidation in net-zero investor groups?
By Natalie Kenway
Increasing number of investor net-zero initiatives may further confuse industry
Sometimes, as the saying goes, ‘there can be too much of a good thing’.
This was something that crossed my mind this week when a press release announcing another net-zero initiative popped into my inbox.
Of course, it is extremely encouraging to see awareness and recognition of the need for action increasing, but I think we need to be careful.
With so many investor groups or alliances forming with their own routes to net zero and agendas, we risk further confusing an industry that is already scratching its head looking for ways to decarbonise businesses and portfolios.
In recent months, ESG Clarity has written about the following initiatives:
- Net Zero Asset Managers Initiative (NZAMI)
- Glasgow Financial Alliance for Net Zero (GFANZ)
- Net-Zero Asset Owner Alliance (NZAO)
- Net Zero Banking Alliance (NZBA)
- Net Zero Investment Framework 1.0
- Race to Zero
- Paris Aligned Initiative Net Zero Asset Owner Commitment
Over the past week or two, these additional initiatives have been announced:
- Net Zero Financial Services Provider Alliance (NZFSPA)
- Net Zero Investment Consultants Initiative (NZICI)
That’s nine investor groups or initiatives each dictating a route to net zero.
Yes, there is overlap – with some being a part of the UN’s Race to Zero and others being driven by the Institutional Investors Group on Climate Change (IIGCC) – and there are those that are targeting clear segments in the industry, such as the investment consultants or asset owners, but do we really need a complicated network of different acronyms – even for an industry that loves an alphabet spaghetti of acronyms?
In the fast-paced world that is ESG investment management, there has been numerous calls for ‘clarity’, clearer labelling and less confusion. I worry that this number of initiatives, the overlap between them and varying methods recommended to reach net zero will add to what is already a very complex conundrum.
When I chatted with Kelly Perry, head of ESG client solutions at Edison Group, earlier this week, she echoed my concerns.
“It is getting confusing. I was speaking about one of these net-zero investor committee groups and then when I went to look up the name, I couldn’t find the one I had referred to in the past as the number of these out there is absolutely mind boggling.”
She adds the number of different groups isn’t helpful to the industry she expects to see them unite under one umbrella very soon.
“I think we will see the net-zero campaigns consolidating, I would hope to see this coming out of COP26,” she said.
For a publication aimed at removing ambiguity and championing transparency within the ESG sector and educating on terms and labels, consolidation is something ESG Clarity will look out for with interest.
Meanwhile, below is a table attempting to highlight the differences of the various net-zero initiatives mentioned above:
|Name of Initiative||Acronym||Brief description||Find out more|
|Net Zero Asset Managers Initiative||NZAMI||Part of the Paris Aligned Investment Initiative. Working in partnership with IIGCC and Principles for Responsible Investment (PRI). An international group of asset managers committed to supporting the goal of net-zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5 degrees. Currently 128 signatories.||Click here|
|Glasgow Financial Alliance for Net Zero||GFANZ||Set up by Mark Carney to bring together more than 160 firms from the bank and financial institutions space to leading on net zero. Part of Race to Zero.||Click here|
|Net-Zero Asset Owner Alliance||NZAAA||UN-convened international group of 48 asset owners committed to setting and reporting on ambitious net-zero targets.||Click here|
|Net Zero Banking Alliance||NZBA||UN-convened alliance of 57 banks that have committed to aligning their lending and investments portfolios with net-zero emissions by 2050.||Click here|
|Net Zero Investment Framework||Not applicable||Formed by the IGCC for managers to use as guidance.||Click here|
|Race to Zero||Not applicable||A global campaign formed by the United Nations Framework Convention on Climate Change (UNFCCC) to rally leadership and support from businesses, cities, regions, investors for a healthy, resilient, zero carbon recovery that prevents future threats, creates decent jobs, and unlocks inclusive, sustainable growth.||Click here|
|Net Zero Financial Services Provider Alliance||NZFSPA||Uniting investment advisers, credit rating agencies, auditors, exchanges, index providers, ESG research and data providers, and proxy research providers. Part of the UN’s Race to Zero campaign.||Click here|
|Paris Aligned Initiative Net Zero Asset Owner Commitment||Not applicable||Another IIGCC initiative, now with 40 signatories. An investor-led global forum supporting investors in aligning their portfolios and activities with the goals of the Paris Agreement. Asset owners will be using the Net Zero Investment Framework.||Click here|
|Net Zero Investment Consultants Initiative||NZICI||Formed this week by 12 investment consulting firms. Committed to supporting the goal of global net-zero greenhouse gas emissions by 2050 or sooner through nine specific action points. The initiative is endorsed by the UN’s Race to Zero campaign and the PRI.||Click here|
Part of the Bonhill Group.