Ninety One is proud to become the first South African signatory to the Net Zero Asset Managers Initiative, which supports institutional investing aligned with the global goal of net-zero emissions by 2050 or sooner.
This commitment underlines Ninety One’s support for the objectives of the Paris Agreement and global efforts to limit global warming to 1.5°C and aligns with the United Nations Sustainable Development Goals.
The assets represented by the Initiative comprise almost half of the entire asset management sector globally in terms of total funds managed. A total of 128 investors including the world’s three largest asset managers – collectively managing $43 trillion in assets – are now part of the initiative.
Signatory asset managers commit to prioritise the achievement of real economy emissions reductions, take account of material portfolio Scope 3 emissions (resulting from activities from assets not owned or controlled by the reporting organisation), create investment products aligned with net-zero emissions and facilitate increased investment in climate solutions.
Beyond this, it is fitting that Ninety One is the first South African signatory because of its unique position to make the case not merely for a transition to cleaner forms of energy, but a just transition that takes into account the unique socio-economic challenges South Africa faces as it works to de-carbonise the economy.
Hendrik du Toit, CEO of Ninety One, said: “Ninety One believes in sustainability with substance. The world needs an inclusive transition plan that works for all its 7.9 billion people. Therefore, a drive to net zero that excludes, intentionally or otherwise, any place or enterprise could result in no net zero at all. So, to us, the mission to reduce carbon must include the entire world. In particular, the carbon-intensive emerging market economies need time, encouragement and resources to adjust. Ninety One, as a company with its roots firmly in South Africa, understands this need perhaps better than most. Emerging economies, after all, are not responsible for the bulk of emissions to date.”
In its drive to achieve low-emission investment portfolios, Ninety One’s intention is to do more than lower ‘portfolio carbon’ by simply constructing portfolios that exclude high-emitting countries and companies. Instead, Ninety One seeks to differentiate between the reduction of ‘portfolio carbon’ and the reduction of carbon emissions across the real economy.
Currently, companies are incentivised to divest their carbon-heavy assets to report declining carbon intensity, while countries are encouraged to ‘offshore’ their carbon emissions to other countries without adjusting domestic consumption patterns. By automatically applying an exclusionary process to achieve net-zero targets, a key consequence for investors is likely to be the creation of portfolios concentrated in developed markets and asset-light industries. This process disregards the requisite transition focus on those industries and economies that remain.
A narrow focus on lowering ‘reported carbon intensity’ is likely to suck capital out of the developing world. This could deny large parts of the world the capital required to build a cleaner, greener economy that would benefit everyone. And it would deny developed-market investors access to the economic dynamism of emerging markets and the potential opportunity to benefit from returns.
Du Toit says that Ninety One believes in active engagement and encouragement towards a transition. “As a recent paper from Imperial College noted, ‘Not all firms can go green, but they can all get engaged in transition.’ Instead of risking a disorderly exit from carbon-intensive economies, sectors or companies by isolating these investments, we will – where we can exert influence and create impact – actively allocate investment to companies and countries that can be encouraged to deliver on transition plans and, importantly, show the will to do so.”
“Ultimately, the drive to net zero is about the reduction over time of all the world’s carbon, not merely of ‘reported’ carbon, and true success is about bringing every country and sector along on the same journey.”
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