Top 100 asset owners "hold keys" to net zero: Willis Towers Watson

The world's top 100 asset owners collectively manage more than $30 trillion, but only 14 of those asset owners are accredited as being net-zero committed, according to research from Willis Towers Watson.

The world's 100 largest asset owners (AO100) grew by 15.7% last year to reach US$23.5 trillion, according to the Thinking Ahead Institute (TAI), a part of Willis Towers Watson. The report notes that there are currently three Glasgow Financial Alliance for Net Zero (GFANZ)-accredited net-zero committed organisations in the top 20 and 11 others in the top 100.

Willis Towers Watson states that "leading asset owners have the power to drive change in the investments industry, and hold the keys and the pathways to net zero."

Tim Unger, Willis Towers Watson's newly appointed Australia head of sustainable investment, noted that the low number of AO100 mentions with accredited net zero targets is likely to change in the next few years.

"Only a relatively small number of the asset owners have effectively committed to a net zero target by 2050 but I think that's going to change quite a lot in the next few years," Unger said. "COP26 has galvanised the momentum that was already there."

Six Australian asset owners appear in the list - The Future Fund Management Agency at number 42, AustralianSuper at number 46, Aware Super at 63, QIC at 75, TCorp at 765 and QSuper at 96.

Pension funds remain the single biggest group of asset owners globally accounting for 58.1% of assets, followed by sovereign wealth funds (34.7%) and Outsourced Chief Investment Officers (OCIOs) and Master Trusts combined (7.2%).

"The AO100 will be more green, so the question becomes, how do you measure that," he said. "I don't think it's based just on a commitment to joining one of the initiatives. It is broader than that, including what are you actually doing with your portfolio. But I do think that alignment with net zero will be one of the things we measure in this study in future years."

Unger noted that one of the take-aways from COP26 was that the target of restricting global warming to 1.5 degrees C by 2050 is alive, but in order for it to be achievable, a significant amount of private capital aligned to that outcome has to be invested.

"This is a defining moment for asset owners," Unger said. The first and obvious point is that there is a significant amount of capital that could be unlocked/allocated more towards this transition and I think that will happen because more asset owners will commit to this net zero target."

Unger noted that it is increasingly accepted that climate risk is financial risk. At COP26, APRA and RBA issued a joint statement as members of the Network for Greening the Financial System (NGFS), a group of central banks and supervisors who share practices and contribute to the development of environment and climate risk management in the financial sector.

The recent joint statement from APRA and the RBA make that unequivocal," Unger said. "The country where that view has been the most controversial - the US - well, the Federal Reserve is moving towards aligning with other central banks, and using climate stress testing for banks certainly, and is likely to introduce guidance for financial institutions."

APRA and RBA noted that because climate change affects the economy and the financial system, it is within the mandates of both institutions to address climate change risks.

"What all of this means it's no longer debatable/controversial about climate risk representing financial risk," Unger said. "Either way, moving away from heavy carbon emitters or towards more friendly/green oriented solutions becomes easier and less controversial."

Read more: Willis Towers WatsonAustralianSuperAware SuperFuture Fund Management AgencyGlasgow Financial Alliance for Net ZeroQICQSuperT CorpTim Unger