Heading for Net Zero

The role of the financial community in support of the planet

The Paris Agreement, and the subsequent accords reached on protecting our planet, have highlighted the need to immediately start reducing greenhouse gas emissions, to achieve carbon neutrality (Net Zero) by 2050. Therefore, greenhouse gas emissions into the atmosphere will have to progressively be reduced by making production processes more efficient by using new techniques, and reabsorbed  principally by adopting innovative capturing and storing technologies, and residually by enhancing natural resources such as forests, the soil, and the oceans (carbon sink*).

To achieve this ambitious goal, the change must involve the civil society and all business sectors, including the financial sector, that has a leading role to play.

The financial community has the possibility of accelerating the processes, channelling capitals towards more sustainable models and new technologies, investing in companies already involved in the transition to zero net emissions, and supporting those that are less sustainable at the present stage, but tangibly show they are ready to make the transition.

Here at Eurizon, we intend to be at the forefront of this change.

The Net Zero Asset Managers Initiative (NZAMI)

Over the years, the agreements reached by governments and EU regulations on the reduction of greenhouse gas emissions have been joined by a number of non-governmental projects aimed at tangibly contributing to the achievement of sustainability goals.

In the financial field, a number of alliances have been established at the global level, that bring together different sector institutions. One of them is the Net Zero Asset Managers Initiative (NZAMI), launched in December 2020, that currently boasts 291 signatories with an aggregate worth of over 66 trillion dollars in assets under management **.

In a nutshell, the initiative is aimed at:

Zero net emissions by 2050

The signatories commit to support achievement of the net zero greenhouse gas emissions goal by 2050 and to supporting investments in line with this goal.

Intermediate decarbonisation goal

NZAMI also aims to guarantee transparency and rigour in achieving an ambitious intermediate decarbonisation goal for a portion of managed assets by 2030.

Monitoring

Taking part in NZAMI also means engaging in the positive management of the AM company’s resources, for instance by monitoring the carbon footprint of its activities (e.g. consumption and energy sources).

Eurizon and Net Zero

In November 2021, Eurizon was the first Italian asset management company to join the Net Zero Asset Managers Initiative, making the commitment, among others, to collaborate with the companies in which it invests to help them achieve tangible decarbonisation goals.

The first steps in achieving the Net Zero goal are to identify the assets to include in the so-called “In-Scope Portfolio”, that will be managed with the aim of achieving carbon neutrality by 2050, and the la definition of four targets: Asset Level Alignment Target, Portfolio Level Reference Target, Stewardship Target, and the Climate Solution Target.

Asset Level Alignment Target

This target implies the progressive alignment of the “In-Scope Portfolio” with the scenario of zero net greenhouse gas emissions by 2050, assessing variables such as: declared commitment, near-term, medium-term, and long-term targets, emissions disclosure, decarbonisation strategies and consistency of capex spending with the goals laid out.

Portfolio Level Reference Target

This is the intermediate target for 2030, that requires estimating and monitoring the decarbonisation rate of the "In-Scope Portfolio".

Stewardship Target

The first two targets can be reached through engagement with the companies invested in, to encourage them to undertake decarbonisation processes for their businesses and, progressively align with the Net Zero scenario.

Investment in Climate Solutions Target

Through the Investment in Climate Solutions Target, Eurizon has declared its intention to step up investment in Green Bonds, i.e. bonds issued with the aim of financing environmental projects that reap measurable and positive impacts, in addition to generating financial return.

United for our future

Setting out on a path towards Net Zero means preparing for the future, and reducing our portfolio’s exposure to climate risk, that currently represents one of the major long-term risks not only for investments, but for our society as a whole. The transition towards a zero net greenhouse gas emissions society and planet represents one of the most important challenges to meet in the next decades, and it is essential to make sure that investment portfolios are appropriately equipped to take it on.

*A Carbon Sink is any system or activity (natural or artificial) that is capable of absorbing and storing more CO2 than it releases (if any). For instance, the oceans, forests, or any industrial technology that reduces the carbon footprint, are all carbon sinks. Source: Eurizon Capital SGR.

** Data as at 9 November 2022

***Eurizon’s “In-Scope Portfolios”, and definitions of Scope 1, 2, and 3

Emissions are classified as:
Scope 1: direct greenhouse gas emissions that occur from sources that are controlled or owned by the company, both fixed (boilers, power generators, industrial processes) and mobile (for instance vehicles).
Scope 2: indirect greenhouse gas emissions associated with the energy purchased and consumed by the company.
Scope 3: indirect emissions associated with the value chain, other than those classified as Scope 2.
Eurizon has chosen to use the Net Zero Investment Framework as its benchmark methodology, and has also established as the asset classes considered in this initial phase Listed Equity and Corporate Fixed Income, excluding for the time being government bonds, due to the limited number of methodologies, still in a consolidation phase.
Eurizon has included in the “In-Scope Portfolio” its mutual investment funds under Italian and Luxembourg law with active management, and with a direct exposure of at least 95% to the asset classes in question.


November 2022


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