Investing for a World of Change

Aligning to net zero from an asset allocator's perspective

The net-zero transition imposes several challenges on asset allocators – not least dealing with inconsistent carbon reporting by asset managers, as well as the difficulty of communicating decarbonisation progress (or otherwise) in a way that is useful for end-investors.

Oct 12, 2021

30 minutes

The net-zero transition imposes several challenges on asset allocators – not least dealing with inconsistent carbon reporting by asset managers, as well as the difficulty of communicating decarbonisation progress (or otherwise) in a way that is useful for end-investors.

The fast view

Net-zero investing: a view from asset owners

  • Responding to the net-zero transition is at least as challenging for asset owners as it is for asset managers. In a panel discussion, investment professionals from a diverse range of asset-owning institutions discussed some of the issues they are facing in addressing the challenge, including with respect to:
    • Setting carbon targets
    • Excluding investments
    • Allocating to transition opportunities
    • Measuring and tracking progress towards net zero, and reporting to end-investors
    • Conducting due diligence on asset managers
  • Gyongyi King, Chief Investment Officer at Alexander Forbes Investments, a South Africa-based multi-manager, shared insights into some of the specific challenges facing assets owners in emerging markets:
    • Exclusion isn’t an option. Most of our assets are invested in South Africa, which is a small market, and we need the full opportunity set to achieve our return and diversification objectives. So net-zero investing for us is all about how we engage with companies.
    • The biggest challenge at the moment is the lack of metrics to measure progress. We need to start measuring now to be able to assess where we are in five years’ time.
    • As a multi-manager, we aggregate data: if everyone calculates net-zero alignment differently, we can’t communicate where we are heading to our end investors.
    • Another challenge in South Africa is that climate change competes with the urgent priorities of job creation and economic growth.
    • Emerging markets cannot fund the net-zero transition themselves. International investment must be coordinated with local investment to support the transition in a collaborative way.

 

All investments carry the risk of capital loss.
Deirdre Cooper
Portfolio Manager
Leslie Gent
Head of Responsible Investing, Coutts
Gyongyi King
Chief Investment officer, Alexander Forbes Investments

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