US asset owners lag on net-zero commitments

As asset owners around the world pledge formal commitments to net-zero, data from Cerulli Associates shows that those in the US are lagging behind peers in Europe and Asia.

Cerulli finds that 44 percent of asset owners in Asia have pledged formal net-zero commitments, closely followed by 43 percent in Europe but less than a third (32 percent) in the US.

The new report, titled Net-zero investment, looks at how institutions’ own reporting requirements are becoming more ‘stringent’ as they increasingly seek out data to report on ESG issues to their own stakeholders.

‘In Europe, approximately 80 percent of institutional investors request data on their exposure to energy-transition risks and physical climate risks, and 61 percent request the carbon footprint of their portfolios,’ says Cerulli. ‘In Asia, portfolio-level exposure to climate risks (69 percent), security-level exposure to climate risk (74 percent) and scenario-testing metrics for climate change (57 percent) will be most requested by asset owners in the next two years.’ 

Although fewer US asset owners say they plan to embed climate risk into mandates than do those in Europe or Asia, Cerulli’s research still points to some notable numbers: 38 percent of US-based asset owners already require climate risk reporting from managers and 34 percent plan to within two years.

Other areas of the firm’s research point to more positive figures from US asset owners. As Cerulli warns that ‘asset managers should anticipate a strong uptick in interest in measuring portfolio temperature’ over the coming 12-24 months, it notes that high numbers can already report on the carbon footprint of their portfolios: 88 percent of managers in Europe do so versus 79 percent in the US.

When it comes to reporting on exposure to energy-transition risks and physical climate risks, US asset owners lead, with almost a third (32 percent) able to report on this measure, compared with 29 percent in Europe. Meanwhile, 29 percent of managers in Europe are able to report on a 2°C scenario – notably ahead of the 18 percent in the US.

Cerulli says data remains the biggest obstacle. ‘Asset managers continue to face challenges and are seeking better-quality data,’ says David Fletcher, senior editor at the market intelligence firm, in a statement accompanying the launch of the report.

He adds that managers, especially those in Europe, that can quickly solve data and reporting challenges will be well positioned: ‘We believe institutional investors in this region will be looking to partner with asset managers that offer strong expertise in climate risk assessment and reporting. Such tools will be highly sought after by European institutional investors that are increasingly focused on scenario analysis and stress testing.’