Written by Steve Watters – Head of Impact
A call for net zero action
As part of our work to engage with asset managers, we have jointly written and signed an open letter to asset managers, calling for stronger net zero commitments and action within the industry. We have taken this action with other companies, as members of the UK Wealth Managers on Climate Group.
We are asking asset managers to do three things:
- Improve the ambition of their commitments
- Accelerate their action towards carbon reductions
- Increase their influence through engagement
There is much that needs to be done if the industry is to fulfil its crucial role in tackling the climate crisis. Ambitious action by asset managers at this time is critical.
A Unified Voice for Climate Action
Paradigm Norton have signed the letter alongside eight other reputable companies, collectively managing £165 billion in assets, as part of the UK Wealth Managers on Climate Group. Formed in September 2023, our collective goal is to engage with asset managers on climate issues, urging them to set and meet ambitious net zero targets. This collaborative initiative aims to drive industry-wide change, ensuring that net zero commitments are both aspirational and actionable.
This is a topic where the details really matter, so here we explain some of what we have asked for.
1. Improve Ambition
The open letter emphasises the need for asset managers to set clear and transparent net zero commitments. We encourage these targets to cover all assets under management, which isn’t always currently the case, and to set measurable interim targets along the road to 2050. Transparency is essential; this means publishing detailed disclosures on emissions, explaining the percentage of assets currently covered by net zero targets, the rationale for any exclusions and how to overcome these.
This clarity helps wealth managers understand the progress and challenges faced by asset managers and ensures that clients can see the tangible impact of their investments.
2. Build Action
Once targets have been set, action must follow. The letter outlines best practices for how to achieve net zero targets. It highlights the importance of ensuring that key people throughout the organisation understand the targets and how these should be factored into the investment process day to day in order to see real change.
Asset Managers are urged to report regularly in ways that enable clients to hold them to account on progress. Where emissions have changed, it’s crucial to understand why this has happened: To what extent is it due to investment effects such as higher/lower investments into funds, or as a result of changes in exposures to companies or sectors. Or are the changes a result of portfolio companies successfully reducing their emissions – the real world changes that actually contribute to reducing global emissions.
3. Increase Influence
To get real world changes, effective stewardship and engagement are crucial. The letter advocates for a stronger link between asset managers net zero commitments and their stewardship activities with investees. This includes engaging directly with corporates to drive emission reductions, establishing clear voting policies for corporate AGMs, and frameworks for escalation if corporations are not meeting expectations. By actively engaging with companies, asset managers can influence them to change their policies and practices towards more sustainable operations.
We also encourage asset managers to join industry groups to collaborate in action that focuses on reducing emissions and enhancing disclosure practices. Collective action amplifies their voice and increases their ability to effect change.
Looking ahead
The path to net zero is complex and challenging, requiring continuous effort and collaboration. Significant progress is needed on these systemic issues and so we will continue to raise this issue in our ongoing dialogue. Paradigm Norton remains committed to working with partners and clients, fostering an environment of transparency, accountability, and shared ambition.
Setting out our expectations through this open letter is a step in the ongoing journey towards a sustainable future. The response and action from asset managers is crucial. We hope to be able to share updates on progress as we continue to advocate for higher standards within the industry.
To find out more about our approach, please get in touch below.
