The United Nations-convened Net-Zero Asset Owner Alliance is urging managers of private assets to “raise their level of climate ambition,” according to a report published Thursday by the group. The alliance counts Aviva Plc, California Public Employees' Retirement System and Swiss Re AG among its 80 members.The asset owners echoed a concern that's been voiced by some of the heavyweights of global finance, including BlackRock Inc.
“Since our commitment to decarbonized portfolios covers all our assets, a reshuffling of businesses and projects from one asset class in our portfolio to another isn't achieving our goals,” said Patrick Peura, who co-authored the paper for the asset owner alliance and is also an engagement manager at Allianz SE.
In a separate report earlier this year, the investor group said an overemphasis on public markets “leaves investors prone to squeezing the balloon,” whereby climate risks are shifted to another part of an investor's portfolio or to another investor altogether.
But private investors can wield great clout because they can “directly influence the topics that a company's management addresses,” such as cutting emissions, NZAOA said. Meanwhile, the dynamics of the private debt markets give credit managers “a unique chance” to influence smaller companies that also are important in the net-zero transition.
This focus seems misplaced. They should be warning their investment managers to earn the best possible returns. Huge principal agent problem here.