WHEB Commentary

Accelerating the transition to net zero


As a naturally skeptical group, investors might be forgiven for expressing some suspicion at the growth in ‘net zero carbon’ pledges over recent months. One wag on Twitter quipped that he would like to commit to ‘net zero alcohol by 2050’. A preferred New Year’s resolution to the ‘dryanuary’ that would actually compel him to stop drinking alcohol!

Although understandable, we hope that investors in WHEB’s strategies give us the benefit of the doubt when learning of our own commitment to achieve net zero carbon portfolio emissions by 2050 at the latest. As a business that promises to ‘advance sustainability’ as part of our mission, this commitment should at least not come as a surprise.

In fact, WHEB committed in 2019 to achieve net zero carbon emissions from our own business by 2025[1]. In truth, this should be relatively straight-forward to achieve[2]. The real challenge is in achieving net zero carbon emissions from WHEB’s investment portfolios. This was the subject of the Asset Manager’s Net Zero Carbon Initiative that was announced in December last year and of which WHEB is a founding signatory[3].

The Asset managers’ net zero carbon initiative

This initiative aims to secure further backing among asset managers to eliminate greenhouse gas (GHG) emissions from their portfolios. This is an altogether more difficult task as it requires portfolio businesses themselves to achieve net zero emissions. For an asset manager like WHEB that invests in companies that supply climate solutions, this is particularly challenging. Equipment like wind turbines, electric vehicles and building insulation requires considerable amounts of energy to manufacture and distribute. It will not be enough for these businesses to rely purely on a decarbonizing electricity grid to achieve their net zero objectives.

Nonetheless, our commitment is that by 2025, at least 50% of the emissions produced by WHEB investee companies will be covered by net zero carbon commitments. By 2030 this will have to be 100%. After eighteen months of engaging portfolio businesses on this topic, we have approximately 17% of the portfolio currently signed up.

In addition to securing specific commitments from investee companies, we will also track real greenhouse gas reductions from the portfolio. Our target is to achieve absolute carbon reductions that are consistent with a 50% global reduction in carbon emissions by 2030. The 50% reduction is what is considered necessary to achieve global net zero carbon emissions goal by 2050.

Making net zero normal

By the end of December nearly three hundred companies had made explicit net zero carbon commitments[4]. The Asset Manager initiative includes thirty asset managers that together manage $8 trillion in assets. WHEB’s commitment covers 100% of our assets, whilst other signatories have as yet committed just a portion of their funds under management. The numbers are significant, but both the number of signatories and volume of assets will surely grow rapidly from here. And they will have to.

At the moment, this project is being pioneered by sustainable investment specialists. In November, Vanguard, who is not a signatory to the net zero initiative, announced that they had a single fund that had more than $1 trillion invested in it[5]. Vanguard alone manages over $6 trillion. The UN Principles for Responsible Investment has signatories that collectively manage over $100 trillion. If these universal owners were to support this initiative, we would quickly get to a point where all listed companies would then come under pressure to adopt stricter targets.

Ultimately all managers are going to need to be fully on-board with this agenda. Encouraging companies to go carbon neutral needs to be made a normal and routine part of ownership. Given the investments that companies are likely to have to make to achieve these commitments, it is critical that they receive sustained support from their investors. With nearly two thirds of the global economy expected to commit to a zero carbon agenda in the run-up to the UN climate conference in December, maybe net zero is close to becoming normal already.

 

 
[1] https://www.whebgroup.com/wheb-commits-to-be-a-net-zero-carbon-business-by-2025/
[2] With a small direct footprint, our biggest challenges are our business travel and is convincing our suppliers to set themselves net zero carbon targets (https://www.whebgroup.com/how-we-plan-to-achieve-net-zero-carbon-emissions/).
[3] https://www.whebgroup.com/wheb-is-proud-to-be-a-founding-member-of-the-net-zero-asset-managers-initiative/
[4] https://unfccc.int/news/commitments-to-net-zero-double-in-less-than-a-year
[5] https://www.investmentweek.co.uk/news

Recent posts

  • The price of civilisation
  • Delivering carbon reductions – moving beyond the targets
  • Is Amazon really a sustainable investment?
  • What is the best way to tackle plastic waste?
  • Deliveroo – bad timing, bad ESG, or just a bad idea?
  • Kingspan and the Grenfell tower fire
  • Greenwashing, regulation and sustainable investment
  • Governance of technology and COVID-19
  • The broad spectrum of healthcare technologies helping to get us out of this pandemic
  • The online mob and the sustainability transition
  • Archive

  • July 2021 (3)
  • June 2021 (1)
  • May 2021 (1)
  • April 2021 (3)
  • March 2021 (1)
  • February 2021 (1)
  • January 2021 (3)
  • December 2020 (1)
  • November 2020 (2)
  • October 2020 (3)
  • September 2020 (1)
  • August 2020 (2)
  • July 2020 (3)
  • June 2020 (2)
  • May 2020 (1)
  • April 2020 (3)
  • March 2020 (1)
  • February 2020 (2)
  • January 2020 (1)
  • December 2019 (1)
  • November 2019 (2)
  • October 2019 (3)
  • September 2019 (1)
  • August 2019 (2)
  • July 2019 (3)
  • June 2019 (2)
  • May 2019 (3)
  • April 2019 (1)
  • March 2019 (1)
  • February 2019 (2)
  • January 2019 (3)
  • December 2018 (1)
  • November 2018 (2)
  • October 2018 (4)
  • September 2018 (2)
  • August 2018 (4)
  • July 2018 (1)
  • June 2018 (1)
  • May 2018 (1)
  • April 2018 (2)
  • March 2018 (2)
  • February 2018 (1)
  • January 2018 (1)
  • December 2017 (3)
  • November 2017 (1)
  • July 2017 (3)
  • June 2017 (1)
  • May 2017 (1)
  • April 2017 (1)
  • February 2017 (2)
  • November 2016 (1)
  • August 2016 (1)
  • July 2016 (1)
  • June 2016 (1)
  • May 2016 (1)
  • April 2016 (2)
  • February 2016 (1)
  • December 2015 (1)
  • November 2015 (3)
  • October 2015 (1)
  • September 2015 (1)
  • July 2015 (2)
  • April 2015 (2)
  • February 2015 (2)
  • December 2014 (2)
  • November 2014 (3)
  • October 2014 (4)
  • August 2014 (1)
  • July 2014 (3)
  • June 2014 (1)
  • April 2014 (2)
  • March 2014 (2)
  • February 2014 (3)
  • January 2014 (4)
  • December 2013 (4)
  • October 2013 (5)
  • September 2013 (3)
  • July 2013 (4)
  • June 2013 (2)
  • May 2013 (4)
  • April 2013 (2)
  • March 2013 (4)
  • February 2013 (6)
  • January 2013 (2)
  • December 2012 (3)
  • November 2012 (1)
  • October 2012 (4)
  • September 2012 (2)
  • August 2012 (1)
  • July 2012 (3)
  • June 2012 (3)
  • May 2012 (6)
  • April 2012 (4)
  • March 2012 (5)