Paris Aligned Asset Owners initiative publishes first Progress Report and initial target disclosures for a further 13 signatories

9 November 2022
  • Inaugural Progress Report showcases innovation and best practice amongst asset owners for turning net zero commitments into action
  • New targets mean 40 asset owners have disclosed initial targets since March 2021
  • The Paris Aligned Asset Owners comprises 57 signatories representing over $3.3 trillion AUM
  • Asset owners are typically pension and superannuation funds, often systemically important

The Paris Aligned Asset Owners initiative (PAAO), an international group of asset owners committed to supporting the goal of net zero greenhouse gas emission by 2050 or sooner, has published its first Progress Report showcasing the steps asset owners are taking to reach their net zero goals.

Alongside the Progress Report, initial target disclosures have also been published for a further 13 asset owners taking the total to 40 since the initiative launched in March 2021. The latest disclosures include targets from asset owners including AP7, Lloyds Banking Group Pensions Trustees Limited, and Ilmarinen.

Asset owners are typically pension and superannuation funds, and increasingly occupy a systemically crucial position in the process of aligning financial flows to net zero by 2050.

PAAO is an outcome of the Paris Aligned Investment Initiative, which was established as a collaborative investor-led forum to support investors to align their portfolios and investment activities to the goals of the Paris Agreement. Since 2021, PAAO has been a partner to the UN Climate Champion’s Race to Zero campaign and a member of the Glasgow Finance Alliance for Net Zero (GFANZ).

PAAO signatories draw on the Net Zero Investment Framework, the most widely utilised net zero methodology by financial institutions, to set targets and devise a net zero investment strategy.

The PAAO 10-point commitment and signatory progress

The Progress Report, which includes 29 case studies, shows how asset owners are developing a range of strategies and approaches to fulfil the criteria set by the PAAO 10-point commitment. Highlights include:

  • Investment in climate solutions (commitment 3): 98 per cent of PAAO signatories that have disclosed targets have established either a quantitative target or qualitative goal for increasing investments in climate solutions. Despite the absence of an industry standard that can be applied across an investment portfolio, signatories have measured their current allocation and set ambitious quantitative targets ranging from 6 per cent of assets under management (AUM) to 25 per cent of AUM by 2030.
  • Stewardship and engagement (commitment 6): Many asset owners have started to clearly communicate expectations for transitioning to the companies they invest in, including setting timebound milestones. Where specific objectives are not met, escalation is starting to become the norm, as recently shown by the decision to file a case against Volkswagen AG by several PAAO signatories after it refused repeated attempts to reveal crucial information on its corporate climate lobbying activities (see case study p.50).
  • Fossil fuels investment policies: 23 signatories that have made disclosures have fossil fuel investment policies in place or under development. The policies vary but often include exclusions of companies that derive a certain proportion of sales or revenues from carbon-intensive activities such as those relating to coal mining, or fossil fuel extraction from tar sands or oil and gas. For example, Dutch pension fund, Pensioenfonds Zorg En Welzijn (PFZW), has set clear time-bound expectations of fossil fuel companies, including a deadline of 2024 for divesting where key criteria is not met (see case study p.27).

Network Partners

Rebecca Mikula-Wright, CEO, Asia Investor Group on Climate Change (AIGCC) said: “The leading pension and superannuation funds are making important progress on getting capital flows to align to the goals of the Paris Agreement. These are systemically important investors, with growing pools of assets invested for the long-term interests of millions of beneficiaries, so they’re particularly exposed to the risks and opportunities of climate change. The data and real world examples in this report show the opportunity that this class of investors have to progress to net zero, and their responsibility to do so.”

Read the full media release

Read the inaugural PAAO Progress Report

Visit the Paris Aligned Investment Initiative website