Asset owners push for portfolio-level metrics for net-zero goals – Cerulli


According to a white paper published Tuesday by Cerulli Associates, owners of institutional assets in Europe, Asia and, to a lesser extent, the United States, are committed to achieving net zero goals and will increasingly want measures at the portfolio level.

“Over the next 12 to 24 months, asset managers should anticipate a surge in interest in measuring portfolio temperature,” Cerulli said.

The white paper found that among institutional asset owners formally committing to net zero, 44% in Asia and 43% in Europe do so, while it drops to 32% in the United States. It also found that an additional 49% of European institutional asset owners plan to formally commit to net zero over the next two years, compared to 31% in Asia and 29% in the US.

In Europe, around 80% of institutional investors ask asset managers for data on exposure to energy transition risks and physical climate risks, and 61% ask for the carbon footprint of their portfolios.

In the United States, 38% already require climate risk reporting from managers and 34% plan within two years. In Asia, Cerulli predicts that over the next two years, asset owners’ portfolio-level exposure to climate risk, security-level exposure to climate risk, and scenario-testing measures for the climate change will be the most requested by asset owners.

Currently, 88% of asset managers in Europe and 79% in the US can report on the carbon footprint of their investment portfolio; regarding exposure to risks related to the energy transition and physical climate risks, 29% of European managers and 32% of Americans can declare. Reporting on the impact of a 2 degree scenario on a portfolio is possible for 29% of managers in Europe and 18% in the United States, according to the white paper.

Asset management firms are improving risk monitoring, sustainable investment allocations and decarbonization strategies as more granular data is collected, but data supply remains a hurdle, said David Fletcher, editor at head of the newspaper, in a press release. “Managers, especially those in Europe, who can quickly resolve these data and reporting issues will be well placed.”

“We believe that institutional investors in this region will seek to partner with asset managers who offer strong expertise in climate risk assessment and reporting,” as European institutional investors increasingly focus more about scenario analysis and stress testing, Fletcher said.

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