UK asset management industry advancing their net zero pledges

Our research shows UK asset managers and owners which are Glasgow Financial Alliance for Net Zero (GFANZ) members were leading in climate actions in the financial services industry, particularly in setting climate mitigation targets. Through their climate actions in climate risk management and investment strategies, they can help investors and savers globally to achieve their net zero objectives.

Individual, private and corporate investors, asset owners and managers are increasingly concerned with environmental, social and governance (ESG) risks and impacts in their investments. They have also started assessing how asset managers can help to achieve their decarbonisation objectives. The UK asset management industry already has a strong, years-long track record in embedding ESG considerations in their practices. According to the Investment Association, close to 80% of the assets managed in the UK are subject to ESG stewardship activities.

UK asset managers and owners are also warm supporters of the GFANZ, a global coalition of leading financial institutions committed to accelerate decarbonisation of the economy. The UK is the most well-represented country across the Net Zero Asset Managers Alliance and Net Zero Asset Owners Alliances under GFANZ.

Our report From commitment to action: Tracking UK financial services’ progress on the pathway to Net Zero examines progress made by UK GFANZ members, including a sectoral analysis that covers 49 asset managers and 25 asset owners. Three dimensions are examined in this report:

• climate targets setting
• implementation of climate actions
• and impacts on the wider economy

They represent increasing level of materiality and relevance of progress. Findings show that UK GFANZ asset managers were leading in climate actions in the financial services industry.

UK GFANZ asset managers and owners have set well-defined climate targets

30% of UK GFANZ asset managers and owners have adopted defined targets on mitigation and divestment 

UK GFANZ asset managers and owners have accelerated progress in recent years in the adoption of targets.

By the end of 2022, almost all of them had already adopted some form of climate target. Thirty per cent of them had developed an advanced response, which means these institutions have adopted defined climate targets supported by relevant policies. The most frequently observed measures undertaken by asset managers and owners were the adoption of mitigation targets and divestment goals. These target-setting measures are proven by evidence of divestment policies on coal and other fossil fuel investments.

Targets are translating into action among UK GFANZ asset managers

Target setting needs to be followed by implementation. In 2022 almost all UK GFANZ asset managers and owners had climate action plans in place. This means almost all have plans for climate-related actions in stakeholder engagement, management practices and disclosures. Close to half have started implementing these plans. However, more progress is still to come. The number of ‘Initial response’ and ‘Advanced response’ entities has stagnated since 2020. This implies these institutions have not furthered their net zero actions in the past three years.

Most UK GFANZ asset managers and owners have shifted away from new fossil fuel investment

The main actions firms have taken are the establishment of internal accountability frameworks and the adoption of climate risk strategies and management. The report highlighted that Jupiter Asset Management Limited, Schroders plc, Brunel Pension Partnership and Strathclyde Pension Fund are asset managers and owners that set good examples in this dimension.

Limited data is available to examine impacts on the wider economy, but data covered in this research indicates that UK GFANZ asset managers and owners were active in climate investment and were shifting away from new fossil fuel investment. US$25m direct project-level investment in climate solutions was observed in 2018-2020. Most UK GFANZ asset managers and owners have shifted away from new fossil fuel investment. Only one asset manager had made new fossil fuel project-level financing between 2015 and 2022.