Several European pension funds are among a group of investors that have set five-year portfolio decarbonisation targets.

The United Nations-convened Net-Zero Asset Owner Alliance members will implement deep greenhouse gas (GHG) emissions reductions in the 16-29 per cent range by 2025 from 2019, amid likely rising global emissions in the same period.

The group of thirty of the world’s largest investors with USD 5trn of assets under management, comprises of several pension funds and providers. This includes the BT Pension Scheme, Alecta, AMF, Caisse de dépôts, Danica Pension, Folksam, FRR, Nordea Life and Pension, Pension Danmark, PFA, Akademiker Pension, Storebrand and ERAFP.

The group’s targets follow the Intergovernmental Panel on Climate Change (IPCC) 1.5 °C scenario for the next five years. Published for public consultation, the 2025 Target Setting Protocol lays out plans for this substantial decoupling of asset owners’ portfolio GHG emissions from the global economy.

The group believes the protocol is integral to coherent and comprehensive plans to reduce emissions, increase investment in the net-zero emissions transition and enhance influence on markets and government policies. The members will work with those willing to adjust their business models, and do not wish to engage in a divestment exercise. However, the group said that in order for their efforts to be met with success, substantial government action is required.

In the first quarter of 2021, individual alliance members will set their own portfolio targets from different starting points with respect to the level of carbon emissions currently contained within their portfolios.

Several alliance members will set large reduction targets, while others have already made substantial progress in their journey to net-zero, therefore the reductions required for their portfolios will be at the lower end of the range, while for some a lower 2025 target may reflect geographic or policy constraint that require them to decarbonize more slowly in early years.

Net-Zero Asset Owner Alliance chair and member of the board management, Günther Thallinger, said: “Alliance members start out by changing themselves and then reach out to various companies to work on the change of their businesses.

“Reaching net-zero is not simply reducing emissions and carrying on with the business models of today. There are profound changes and opportunities that will come from the net-zero economy, we see new business opportunities and strong wins for those who are ready to lead."

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