Guide to taking action for asset owners
Investors all across the globe are working to ensure their companies are taking necessary action on climate change in line with a net-zero emissions pathway. Find out more about their targets and commitments below.
Why take action as an asset owner?
One thing is clear: investors cannot avoid climate-related risks. But they can protect their portfolios against them. And whilst an increasing number of investors recognise the economic risks associated with climate change, there remains a lack of ambition to drive real-world improvements and too many asset owners are failing to effectively implement their commitments to net-zero emissions in their portfolios. Given that many asset owners have future liabilities, there is a strong incentive to encourage a transition to net-zero emissions now, rather than later.
Asset owners, who sit at the top of the investment chain, have a vital role to play in the transition to a net-zero economy and need to ensure their asset managers can and are taking active steps to act on climate change, if they are to protect their investment portfolios over the long-term. Part of this process requires asset owners to ensure their managers are actively seeking credible climate transition plans and annual accountability. Only by increasing pressure on their companies to address climate change, can asset owners shift the dialogue away from setting climate targets to actually reaching these targets.
Why should asset owners adopt ‘Say on Climate’?
- Ensuring companies adopt a strong accountability mechanism for their climate change approach can help drive superior returns and is in the long-term interest of clients.
- Fund trustees have a fiduciary responsibility to ensure the asset managers they choose are competent on climate change.
- Pension scheme beneficiaries increasingly expect their investments to be managed in line with their values, particularly in light of the climate crisis.
- Asset managers reporting on their annual voting record and rationale provides a strong supervision and alignment mechanism for asset owners.
How to take action as an asset owner?
A step-by-step process
Asset owners should take the following actions to ensure their asset managers are actively seeking to secure credible company climate transition action plans and accountability as standard:
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Publicly endorse this concept: your voice will help to ensure asset managers and companies realise this is increasingly recognised as good practice.
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Adopt this practice in your investment policy to set a clear expectation that asset managers will vote to ensure companies adopt this practice.
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Write to your asset managers to formally ask them to update their own policies accordingly, and reflect this approach in your Investment Management Agreements.
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Hire climate-competent investment consultants to ensure your advice includes an assessment of whether asset managers have adopted this practice and their wider voting record on climate resolutions.
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Additional resources
Further information, guidance, and support to help you accelerate shareholder action on climate change.
“The lack of disclosure and the timidity of climate plans at many companies are very serious concerns for investors. Such concerns should be addressed by all companies publishing credible climate action plans and allowing investors to have a say on whether the strategies are fit for purpose”
– LAPFF, 2023