8 July 2021
Ninety One, an active global investment manager, is proud to announce that it has joined the Net Zero Asset Managers Initiative, which supports investing aligned with the global goal of net zero emissions by 2050 or sooner. This commitment underlines Ninety One’s support for the objectives of the Paris Agreement and global efforts to limit global warming to 1.5°C and aligns with the United Nations Sustainable Development Goals.
The assets represented by the Initiative represent almost half of the entire asset management sector globally in terms of total funds managed. A total of 128 investors, including the world’s three largest asset managers, collectively managing $43 trillion in assets are now part of the initiative.
Signatory asset managers commit to prioritize the achievement of real economy emissions reductions, take account of material portfolio Scope 3 emissions (resulting from activities from assets not owned or controlled by the reporting organization), create investment products aligned with net zero emissions and facilitate increased investment in climate solutions.
Hendrik du Toit, CEO of Ninety One, said: "Ninety One believes in sustainability with substance. The world needs an inclusive transition plan that works for all its 7.9 billion people. Therefore, a drive to net zero that excludes, intentionally or otherwise, any place or enterprise could result in no net zero at all. So, to us, the mission to reduce carbon must include the entire world. In particular, the carbon-intensive emerging market economies need time, encouragement and resources to adjust. Ninety One, as a company with its roots firmly in South Africa, understands this need perhaps better than most. Emerging economies, after all, are not responsible for the bulk of emissions to date.”
In its drive to achieve low-emission investment portfolios, Ninety One’s intention is to do more than lower ‘portfolio carbon’ by simply constructing portfolios that exclude high-emitting countries and companies. Instead, Ninety One seeks to differentiate between the reduction of ‘portfolio carbon’ and the reduction of carbon emissions across the real economy.
Currently, companies are incentivized to divest their carbon-heavy assets to report declining carbon intensity, while countries are encouraged to ‘offshore’ their carbon emissions to other countries without adjusting domestic consumption patterns. By automatically applying an exclusionary process to achieve net zero targets, a key consequence for investors is likely to be the creation of portfolios concentrated in developed markets and asset-light industries. This process disregards the requisite transition focus on those industries and economies that remain.
Du Toit says that Ninety One believes in active engagement and encouragement towards a transition. “As a recent paper from Imperial College noted, ‘Not all firms can go green, but they can all get engaged in transition.’ Ultimately, the drive to net zero is about the reduction over time of all the world’s carbon, not merely of ‘reported’ carbon, and true success is about bringing every country and sector along on the same journey.”
Therese Niklasson, Global Head of ESG at Ninety One said: “By signing the Net Zero Asset Managers initiative, we are committed to working with our clients and for the global climate goals that achieve real-world emission cuts, reward improvement and progression and prevent capital being driven away from the regions that need it the most.”