Investors overseeing $9.5 trillion in assets are intensifying calls for increased accountability within private markets, particularly as these markets begin to hold more fossil-fuel investments. The move underscores a growing concern over the private sector's role in climate change and the need for transparent investment practices.
The Net Zero Asset Owner Alliance (NZAOA), which includes heavyweight members like CalPERS, Zurich Insurance, and Munich Re, is broadening its investment protocol to encompass all private asset categories. This expansion aims to ensure more stringent emission reduction measures across the board, including areas previously overlooked such as debt funds and real estate investments.
Gunther Thallinger, NZAOA's chair and an executive at Allianz SE, highlighted the urgency of this initiative. He pointed out the challenges posed by the lack of transparency in private investments, which complicates global efforts to maintain warming below 1.5°C. Thallinger emphasized the necessity for both reporting mandates and regulatory frameworks to address these issues.
Recent data from Preqin reveals a significant surge in private credit deals within the oil and gas sector, totaling $9 billion over the last two years, a stark increase from the $450 million recorded in the previous period. This growth comes as many banks step back from the industry, heeding regulatory and investor calls for more sustainable practices.
Thallinger expressed concern over the accumulation of high-carbon assets in private markets, noting the potential impact on investment performance and the increased difficulty in engaging with the sector on emission reduction.
In response, the NZAOA has updated its emission reduction targets, requiring members to aim for a 40% to 60% reduction by 2030, based on 2019 levels, without resorting to carbon credits. This represents a significant step up from the previous five-year goal of a 22% to 32% reduction.
Thallinger also advocated for the global adoption of the International Sustainability Standards Board's reporting standards, suggesting that while the European Union’s Corporate Sustainability Reporting Directive (CSRD) is a solid model, its impact is limited by its geographical scope. The CSRD, which mandates around 50,000 companies to disclose sustainability metrics, is seen as a positive step towards more informed investment decisions.
As a part of the Glasgow Financial Alliance for Net Zero (GFANZ), NZAOA continues to push for comprehensive sustainability reporting and analysis, aiming to foster a more transparent and equitable investment landscape.
