May 3, 2022 | Stamford, CT — Institutional investors are putting their money—and their portfolios—where their mouth is, when it comes to climate change. 

Institutions around the world are adopting ESG standards, and they have identified fighting climate change and the reduction of carbon emissions as their top priorities. In an attempt to leave concerns about “greenwashing” behind them, asset owners and investment managers are committing to specific “net-zero” targets advanced by organizations dedicated to addressing climate change. 

More than 80 asset owners with nearly $14 trillion in combined assets under management have committed to achieve net-zero portfolios by 2050, in keeping with standards created by the UN-convened Net Zero Asset Owner Alliance. Approximately 220 asset managers with a combined $57 trillion in AUM have signed on to The Net Zero Asset Manager Initiative, in which members are being tasked with setting asset-class-level targets for net zero along with providing robust methodologies for overall portfolios. Forty-three of those signatories have set targets to achieve net-zero portfolios by 2050. 

Is Offsetting a Form of Greenwashing?
Early in their ESG journeys, many institutional investors embraced “offsetting,” or the practice of investing in environmental projects or products around the world in order to balance out carbon emissions. 

“Offsetting is facing greater scrutiny as a means of reducing the environmental impact of an investment portfolio,” says Sophie Emler, Senior Relationship Manager at Coalition Greenwich and author of Investment Managers Take Action on Carbon Emissions. “In fact, increasing numbers of investors view the practice of offsetting as a form of greenwashing.”

Coalition Greenwich expects to see both asset owners and investment managers take additional steps to demonstrate their real commitment to emissions reductions in coming months. Developments in regulation and internationally aligned standards, such as the European Union’s expected guidance on net-zero cooperation, will help managers and investors alike set measurable targets on net zero against which they can provide comparable reporting.

“New disclosure rules, combined with the growing availability of sustainable products across all asset classes, will help investors sort real carbon-emissions objectives from those that are net zero in name only,” says Sophie Emler.