Carbonsink - What science-based action will be in climate transition?

BlackRock made the headlines once again in April announcing that by 2030 at least three quarters of its investments will be tied to issuers with a scientific target to cut net greenhouse gas emissions. Currently the figure of these kind of investments made by BlackRock amounts to around to a quarter.

In the statement reported by Reuters and Bloomberg, the major asset manager said that “as the transition proceeds and issuers and asset owners continue to position themselves in front of it, we anticipate that by 2030, at least 75% of BlackRock corporate and sovereign assets managed on behalf of clients will be invested in issuers with science-based targets or equivalent”.

Setting a 2030 goal is a central requirement for members of the UN-convened Net Zero Asset Managers Initiative, a network aiming to get to net-zero emissions across their assets which BlackRock joined in March 2021. Members of the initiative commit to support investing aligned with net zero emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5°C. This means, for instance, setting 2030 targets consistent with a 1.5°C scenario, taking account of portfolio Scope 1 & 2 emissions and material Scope 3 (to the extent possible), and disclose climate risks in line with the Task Force on Climate-Related Financial Disclosures’ (TCFD) framework.

Currently 236 asset managers with USD57.5 trillion in assets jointed the Net Zero Asset Managers Initiative’s commitment. Another coalition named Glasgow Financial Alliance for Net Zero (GFANZ) was launched in April 2021 to provide a forum to accelerate the transition to a net-zero global economy. Members of GFANZ currently represent more than USD130 trillion in assets under management and advice.

According to latest analysis, over 90% of global GDP is now covered by a net zero target of some kind, but there are wide variations in the criteria used for setting and monitoring these targets. They can differ in terms of the sources of emissions included, the depth and speed at which emissions are reduced, and the timeframe of the target. However, robustness and integrity are evolving in line with the diffusion of science-based frameworks such as the ones developed by the Science Based Targets initiative (SBTi).

At the global level, the number of companies committed to or having an emission reduction target validated by SBTi grown from around 30 in 2015 up to over 2700 in 2022. And the trend is strengthening. According to our analysis, Italian companies committing and setting SBTs are now over 50 and the growth of the past two years outperformed global trends.

In 2022 and in the next few years, attention to climate risk, as well as to integrity and accountability of climate commitments will continue to grow. The private sector is seeing important initiatives underway such as the climate disclosure proposal by the U.S. Securities and Exchange Commission,  the formation of the International Sustainability Standards Board (ISSB) and the European Corporate Sustainability Reporting Directive. National climate plans will be under scrutiny later this year under the first global stocktake process ongoing since the COP26 climate conference in Glasgow last November.

The transition to a net zero emissions economy provides opportunities, not just risks, for the financial sector, which is acknowledged as a powerful force to drive the global economy towards a more sustainable and resilient path. The SBTi is developing a Net-Zero Standard for Financial Institutions, which is expected to be launched in early 2023 (The SBTi Insider: April Newsletter (mail)). The Standard is incorporating the latest climate science and methodologies to provide consistent criteria and scientific basis banks, asset owners, asset managers and other financial operators need to transform net-zero commitments into targets and actions.

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