The UN-convened Net-Zero Asset Owner Alliance has called for asset owners and index providers to develop and use net-zero-aligned benchmarks.

Representing 80 institutional investors with $11tr in assets under management, the alliance has identified a lack of climate indices that can be applied in a broad range of cases and to globally diversified multi-asset class portfolios.

Recognising that benchmarks are a crucial tool for integrating decarbonisation objectives into the investment process, it is calling on index providers to develop net-zero-aligned benchmarks and on asset owners to apply them.

Sindhu Krishna, head of responsible investments, Phoenix Group, said: “From an asset owner perspective, benchmarks serve as effective tool for portfolio steering and engagement with asset managers. As we hear of the window of opportunity closing for keeping the 1.5 C ambition within reach, it is crucial for investors—who recognise that climate change presents financially material risks to investment portfolios—to have all the tools at their disposal for portfolio decarbonisation.”

The Net-Zero Asset Owner Alliance also summed up COP27 with a positive note on the international agreement to establish a ‘loss and damage’ fund, urging the international community, and in particular developed countries, to maintain momentum and to proceed with operationalising and sufficiently capitalising the fund so that it can start enabling action on the ground as quickly as possible.

Conversely, it voiced its concern that there was no new agreement at COP27 to raise and catalyse countries’ ambition to decarbonise. The Nationally Determined Contributions (NDCs), collectively, being far from where the science asks them to be, and it is disappointing that COP27 did not deliver enough ‘meaningful ratchet’, at a time where it is most needed.

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