1. Introduction

The report outlines the Net-Zero Asset Owner Alliance’s (the Alliance) approach to aligning investment portfolios with a 1.5°C pathway. Formed in 2019 with USD 2.4 trillion in assets under management (AuM), the Alliance has grown to 86 members with USD 9.5 trillion in AuM. Members commit to reducing financed greenhouse gas (GHG) emissions by 2050, reflecting fiduciary duties to manage climate-related risks. Members must set intermediate targets within 12 months of joining and report annually. Targets reflect the Alliance’s theory of change, which prioritises real-economy emissions reductions through engagement and policy advocacy.

The target-setting framework requires members to set at least three types of targets—engagement plus two of sub-portfolio, sector, or climate-solution investment. Methodologies are updated annually, with the latest protocol incorporating IPCC AR6 modelling and a 2030 emissions reduction range of 40–60%. Governance has also strengthened, with an Accountability Mechanism applied to member targets and alignment with Alliance position papers.

2. Aggregate results

Alliance membership increased from 74 to 86 during the reporting period. Combined AuM fell slightly due to global market conditions but reached USD 9.5 trillion. By May 2023, 69 members had set intermediate targets, representing USD 8.4 trillion in AuM. Across the four target types, 2023 saw 27 new engagement targets, 26 new sub-portfolio targets and 33 new climate-solution investment targets.

The Alliance reports absolute financed emissions to demonstrate progress towards net zero. Despite membership growth, financed emissions decreased from 221.1 mtCO₂e in 2021 to 213.4 mtCO₂e in 2022. Each cohort of members that had set targets showed emissions reductions: the 2018 cohort reduced emissions by 21% by 2022, the 2019 cohort by 12%, the 2020 cohort by 20% and the 2021 cohort by 16%. Variability reflects real-world emissions trends, reporting changes, Scope 3 inclusion and external shocks.

3. Progress on sub-portfolio and sector targets

Sixty-seven members have set sub-portfolio targets, covering USD 3.4 trillion of AuM. Target ranges align with the protocol: 22–32% reductions by 2025 and 40–60% by 2030. Average 2025 target reductions include: 27.2% for listed equity (absolute), 26.2% for corporate debt (intensity), and 23–26% for real estate, reflecting regional differences.

Coverage of eligible AuM is high: 95% for listed equity, 93% for corporate debt and 78% for real estate. Sector targets increased modestly in number but rose in ambition. For oil and gas, average targeted emissions-intensity reductions rose to 28.7%. Other sectors with targets included utilities, cement and steel, shipping, road transport and aviation.

Members’ alignment with the 2020 Thermal Coal Position shows that 97% have a thermal coal policy; 82% are fully aligned, 3% partially aligned and 15% are not aligned. Misaligned members were asked to provide explanations under the Accountability Mechanism.

4. Progress on engagement

Members selected 238 engagement KPIs in 2023, averaging more than three per member and exceeding protocol requirements. Collaborative corporate engagement increased substantially, particularly through initiatives such as Climate Action 100+. Engagement with asset managers also grew, rising to 34 members setting relevant KPIs. Members contributed more frequently to Alliance position papers, including the 2023 Position on the Oil and Gas Sector.

5. Progress on investing in climate solutions

Sixty-eight members set climate-solution investment targets. Total reported climate-solution investments reached USD 380.6 billion in 2023. Investment growth between 2021 and 2022 exceeded 50%. The largest allocations were to buildings (49%) and energy (35%). Infrastructure and private assets saw year-on-year increases of more than 100%.

6. The importance of creating an enabling policy environment

The report stresses that credible climate policy is essential for accelerating net-zero transitions. Policymakers are encouraged to strengthen frameworks that reduce uncertainty, including carbon-pricing mechanisms, transition plans and reforms to multilateral finance. Ahead of COP28, the Alliance calls for scaling investment-enabling policy reforms, integrated national transition plans, reforms to multilateral financial institutions and long-term policies that support a just transition.