As asset owners around the world pledge formal commitments to net-zero, those in the US are lagging behind their European and Asian counterparts, according to a new report from Cerulli Associates – Net-Zero Investment.
The report looks at how institutions’ own reporting requirements are becoming more ‘stringent’ as they increasingly seek out data to report on environment, social and governance (ESG) issues to their own stakeholders.
It found that that 44% of asset owners in Asia have pledged formal net-zero commitments, closely followed by 43% or 32% have in the US.
‘In Europe, approximately 80% of institutional investors request data on their exposure to energy-transition risks and physical climate risks, and 61% ask about 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% of US-based asset owners already require climate risk reporting from managers and 34% plan to within two years.
In addition, it notes that high numbers can already report on the carbon footprint of their portfolios –Â 88% of managers in Europe do so compared to 79% in the US.
Cerulli warns that ‘asset managers should anticipate a strong uptick in interest in measuring portfolio temperature’ over the coming 12-24 months.
The biggest obstacle continues to be data, according to Cerulli.
“Asset managers continue to face challenges and are seeking better-quality data,” says David Fletcher, Associate Director, Editorial at the market intelligence firm.
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.”
The White Paper can be downloaded from Cerulli Associates website: https://www.cerulli.com/knowledge/white-paper-net-zero-investment
