Ninety One, the investment firm spun out of Investec, has become the first SA signatory to the Net Zero Asset Managers Initiative, which supports institutional investing aligned with the global goal of achieving net zero emissions by 2050 or sooner.
SA’s biggest listed-asset manager said this underscored its support for the objectives of the Paris Agreement and global efforts to limit global warming to 1.5°C in alignment with the UN Sustainable Development Goals. Signatories to the Net Zero Asset Managers Initiative represent almost half the funds overseen by the entire asset management sector globally. A total of 128 investment firms that collectively manage about $43-trillion in assets have joined the initiative.
“The world needs an inclusive transition plan that works for all its 7.9-billion people,” said Hendrik du Toit, CEO of Ninety One. “To us, the mission to reduce carbon must include the entire world. In particular, the carbon-intensive emerging market economies need time, encouragement and resources to adjust. Emerging economies, after all, are not responsible for the bulk of emissions to date.”
Du Toit cautioned in an opinion piece in Business Day on June 28 that SA and other carbon-intensive emerging economies must lobby developed nations to grant them sufficient time to achieve a just transition to achieving lower emissions. His warning comes as the EU is expected to unveil a series of penalties later in July that it plans to impose on imports from countries with large carbon footprints.
Asset managers who have signed up to the Net Zero Asset Managers Initiative commit to prioritise the achievement of real economy emissions reductions by creating investment products aligned with net-zero emissions. They also plan to promote capital allocation to companies that are leading the way in reducing emissions or developing products that can help reduce humanity's collective carbon footprint.
Ninety One says its intention is to do more than simply construct investment portfolios that exclude high-emitting companies and countries. Instead, it wants to differentiate between the mere reduction of carbon by companies in its portfolios by also seeking the lowering of emissions across the real economy.
Since companies and countries can reduce their carbon intensity by simply divesting out of assets with high carbon footprints and outsourcing the problem to assets located in other countries, the risk is that investment firms will end up creating portfolios concentrated in developed markets or industries that don't have significant carbon emitting asset bases.
Ninety one says a narrow focus on lowering reported carbon intensity would result in capital being sucked out of developing economies without giving them an opportunity to achieve a fair transition to a more sustainable future. It argues that could deprive developing nations of the capital they require to build cleaner, greener economies.
“Instead of risking a disorderly exit from carbon-intensive economies, sectors or companies by isolating these investments, we will — where we can exert influence and create impact — actively allocate investment to companies and countries that can be encouraged to deliver on transition plans,” said Du Toit.
“The drive to net zero is about the reduction over time of all the world’s carbon, not merely of reported carbon, and true success is about bringing every country and sector along on the same journey.”
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