Paris Aligned Asset Owners issues first-year progress report, best practices

Asset owners with a collective $3.3 trillion in assets aiming for net-zero emissions by 2050 released a progress report Wednesday that also highlighted best practices for achieving those goals.

The Paris Aligned Asset Owners initiative includes 57 asset owners from Europe, North America and Oceania, including New York State Common Retirement Fund, Barclays Bank UK Retirement Fund and New Zealand Super Fund. So far, 40 have disclosed initial targets for net-zero goals since the group was formed in March 2021.

The asset owners, typically pension and superannuation funds, “increasingly occupy a systemically crucial position in the process of aligning financial flows to net zero by 2050,” a news release said.

The PAAO progress report covers 10 commitments, along with 29 case studies showing how asset owners are fulfilling their net-zero pledges.

One accomplishment highlighted in the progress report is investment in climate solutions; 98% of the PAAO signatories with disclosed targets are aiming to have 6% to 25% of assets under management at net-zero by 2030.

On stewardship and engagement goals, more asset owners are communicating expectations and milestones for the companies they invest in, and “escalation is starting to become the norm,” the report said.

Investment policies on fossil fuels among PAAO members range from excluding companies with a certain proportion of sales or revenues from carbon-intensive activities to deadlines for divesting.

Adam Matthews, chief responsible investment officer for the Church of England Pensions Board, London, that oversees three pension funds, described the initiative as “an enormously important, practical and collaborative forum for developing best practices,” he said in the release.

Debby Blakey, CEO of HESTA, the A$68 billion ($44.1 billion) Melbourne-based superannuation fund focused on Australian health-care workers, said the initiative offers “a rigorous methodology to underpin our targets which provides better transparency and aligns us with international standards. This will improve our own climate-aligned investment practice, and will contribute to collective, accelerated climate action within the broader financial sector,” she said in the release.

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