Mercer NZ has added its weight to the net-zero fund management movement in a pledge that could see carbon emissions across the group’s $10 billion portfolio cut almost in half by 2030.
In a release last week, Mercer says the NZ multi-manager is targeting “net-zero absolute carbon emissions” for its funds by 2050, following similar commitments in the global firm’s Australian, UK, European and Asian operations.
Ronan McCabe, Mercer NZ chief investment officer, said in a statement: “We have a robust climate transition plan in place to track and measure our activity, and we look forward to sharing our progress with our clients and members. We see the transition to a lower carbon portfolio as a journey, beyond just exclusions, and we are looking to continually enhance the management of our clients’ portfolios for what we see as a systemic risk.”
The Mercer move also coincides with a swag of 41 investment firms signing on to the Net Zero Asset Managers Initiative, which aligns members to the same goal of scrubbing all carbon emissions from portfolios by 2050 “or earlier”. Mercer is not yet a signatory of the Net Zero pledge.
BT Funds Management NZ, the Westpac-owned investment business, was among the 41 new Net Zero signatories – and the first NZ-based manager to join the list of now 128 firms that collectively oversee some US$43 trillion.
In a release, Karen Silk, BT Funds NZ chief, said: “As one of New Zealand’s largest fund managers, we recognise the immense capacity we have to drive positive outcomes for our employees, customers and communities. We believe climate change is having an increasingly profound impact on our natural environment, with negative flow-on effects for our society, economy and culture. The alignment of our portfolio with a 1.5 degree Celsius temperature target is an important step in supporting sustainable opportunities and reducing climate risks to protect and grow our customers’ wealth.”
Other new Net Zero members include big-name managers well-known in NZ such as Franklin Templeton, Brandywine Global, MFS and Willis Towers Watson with Russell Investments among the existing signatories.
But Net Zero is not the only global emissions agreement open to fund managers. For example, this February Pathfinder signed up to the B Corp Climate Collective, which sets a carbon neutral target 20 years earlier than the Net Zero club. B Corp is a global certifier of businesses that balance “purpose and profit”. The group’s carbon pledge is open only to B Corp-certified firms such as Pathfinder, which earned its credentials last year.
“We chose the B Corp initiative over the Asset Manager’s initiative as both initiatives are part of the global UNFCCC [United Nations Framework Convention on Climate Change] Race to Zero campaign, but the B Corp initiative goes much further,” a Pathfinder spokesperson said.
“We have committed to a 2030 target because we believe that in general 2050 targets tend to be unambitious and not aggressive enough, and they will not allow society to avoid the worst impacts of climate change, especially the most vulnerable.”
Nonetheless, the Net Zero Asset Managers movement has grown rapidly since launch in December last year, the group says in a statement.
“The latest signatories take the initiative close to representing almost half of the entire asset management sector globally in terms of total funds managed (standing at $100 trillion),” the release says.
Fund managers aligned to the Net Zero group commit to nine goals, including:
- setting interim targets for 2030, for assets to be managed in line with the net zero goal, consistent with a fair share of the 50% global reduction in CO2 identified as a requirement in the Intergovernmental Panel on Climate Change (IPCC) special report on global warming of 1.5°C;
- taking account of Scope 1 and 2 emissions and, to the extent possible, material Scope 3 emissions in investment portfolios;
- implementing a stewardship and engagement strategy, with a clear escalation and voting policy, that is consistent with the ambition for all assets under management to achieve net zero emissions by 2050 or sooner; and,
- creating investment products aligned with net zero emissions by 2050 and facilitate increased investment in climate solutions.
Fiona Reynolds, the departing chief of the United Nations Principles for Responsible Investment (PRI) – one of the six agencies managing the Net Zero program – said in the statement: “Commitment from the investment managers – alongside asset owners, banks, insurance companies and governments – to net zero is tremendously important to enable a transition to a low-carbon economy – and to ensure we have the right framework to finance that transition. As we approach COP26, it’s essential that actors across the investment chain alongside governments continue to take net-zero-related actions, and to be held accountable for those commitments through interim and longer-term targets.”
Mercer, meanwhile, will follow its own Climate Transition Plan to work with underlying managers – some of who have signed the Net Zero agreement – to achieve carbon emission targets.
“Progress on absolute emissions and carbon intensity reductions will be monitored annually – together with analysis on transition capacity and allocation to ‘green’ solutions – using Mercer’s Analytics for Climate Transition (ACT) tool, launched in November 2020,” the Mercer NZ release says.
McCabe said while Mercer backs the Net Zero Asset Managers “ambition”, the firm is implementing carbon strategies on a region-by-region basis.
“Those regional processes are not yet complete, but rest assured, Mercer is busy on both target setting towards net-zero and, importantly, implementation to address climate transition considerations in our portfolios,” he said.
Marsh McLennan, the ultimate owner of Mercer, also aims to be carbon neutral this year while cutting emission by 15 per cent by the end of 2025.