Australian asset owner group: ‘not all net zero commitments are equal’

Major 'gaps' in climate commitments make it difficult for asset owners to determine how well-prepared an investee company is for the transition to net zero, according to the chief of a major Australian investor group.

Louise Davidson, chief executive of the Australian Council of Superannuation Investors (ACSI), which represents asset owners and institutional investors with around $1 trillion in funds under management, said that "despite improvements across the market, not all net zero commitments are equal." 

She warned that "significant gaps in detail, depth, comparability and credibility remain. This makes it difficult for investors to assess how resilient a company might be in the transition to a low-carbon economy and how aligned its approach is to the goals of the Paris Agreement."

Davidson wrote in a blog post that "it is a similar story with transition plans and emissions targets." 

She stressed that greater transparency is required on carbon offset use and management of transition and physical risks, pointing out that "just a small minority" of companies account for all of their emissions: scopes 1, 2 and 3 within their targets.

"Though carbon offsets form part of many companies’ climate strategies, disclosure on the quantity, type, projects and hierarchy of their use is limited," Davidson continued.

She said that less than a third of companies state their intention to first reduce emissions through abatement and use offsets only for residual emissions. 

"Companies should use offsets as a last resort, after exhausting all other efforts to decarbonise."

IGCC Summit in Sydney

Davidson's comments came as the Investor Group on Climate Change (IGCC), an institutional investor coalition whose 102 members - including many ACSI partners - manage over $30 trillion, kicked off its annual gathering in Sydney, Australia.

On Day one, conversations revolved around the nuts and bolts of Australia’s fast moving regulatory environment, drivers of capital allocation by asset owners and a progress report on investor engagement at Australia’s largest corporations.

A lot of attention at this year's conference is going to Australia's adjusted approach to climate issues. Following the election of the Anthony Albanese-led Labor Party government, last year, climate policy in Australia has been fast moving.

The summit will also put the spotlight on what are arguably two of the most pressing climate-related issues for asset owners: engagement and capital allocations to climate solutions.

The agenda includes a panel to question why “progress is still below expectations”, despite engagement having paved the way for bold corporate ambition.

In addition to engagement, the summit will offer an opportunity to reflect on changes in capital allocations. According to the agenda, $12 trillion needs to be deployed in climate solutions by 2030.

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IGCC Summit Day 1: Spotlight on policy, capital allocation and engagement