ShareAction’s text for Responsible Investment Standards & Expectations (RISE) for asset managers, with focus on interim net zero targets, highlights the significance finance holds in addressing the problem climate change poses and in achieving sustainable development goals. The need for responsible investment considers the financial risks and their impacts on society, both positive and negative, on society and the surrounding environment.  

The text puts a primary focus on interim net zero targets, which are vital to limit global warming to 1.5C. These targets ensure that asset managers are committed to the goal and are held accountable for their own progress. Further, achieving these decarbonisation goals requires ambition from large corporates and engagement from asset manager’s clients and from a supportive regulatory body.  

Asset managers are pivotal in their influence over companies to reduce emissions. They’re responsibilities include setting and achieving interim net zero targets, working alongside asset owner clients and engaging with portfolio companies to drive emissions down. However, the text conveys how that the current net zero ambitions fall short of the required standard with a lack of clarity with the target itself.  

The text provides some expectations to help solidify these interim net zero targets. The first expectation is to advocate for a common approach to emission reporting and target setting. This would provide further clarity and confidence in asset managers’ commitment to decarbonisation. Additionally, they recommend the disclosure of uncommitted assets and the rationale for their exclusion. To ensure the full commitment to net zero targets, all assets and asset managers should provide a breakdown of uncommitted assets, and the timeline for their inclusion. 

Further, the text suggests indicating the significance of emissions from uncommitted assets compared to committed assets to provide a clearer picture of the emissions trajectory. To provide full clarity, asset managers should report and set targets for gross direct corporate emissions separately from net total emissions.   

Additionally, the use of portfolio-level offsets should be disclosed, including the rationale for their usage, with a commitment to disclose aggregate company-level offsets over time. For a more thorough approach, asset managers should commit to incorporate Scope 3 emissions into reporting and targets over a commonly agreed timeline. This would properly address emissions across the entire cycle and capture the full impact of the investment. 

Furthermore, to evidence a real-world impact, asset managers must disclose the underlying contributions from portfolio companies to emission target, which would clarify in the assessment of the effectiveness of portfolio decarbonisation. It also allows key stakeholder(s) to comprehend how emissions reductions are achieved and their real-world impact.    

Target ambition should be constructed to accurately reflect the demographics of the portfolio. Different factors have varying impacts on decarbonisation, and targets should account for these disparities. This method allows asset managers’ targets are aligned with specific circumstances of areas in which they invest.  

In conclusion, financial responsibility is essential in addressing climate change and achieving sustainable development goals. ShareAction’s RISE text provides guidelines to enhance responsible investment, with a strong focus on strengthening interim net zero targets for asset managers. This helps aim to promote transparency, accountability and effective emissions reduction within the financial sector.