Calls for effective carbon pricing as critical to enable capital allocation in line with net zero
On Finance Day at COP26, abrdn announced its target to reduce the carbon intensity of its assets by 50% by 2030 vs a 2019 baseline1.
abrdn has developed a climate change strategy focused on Net Zero Directed Investing (NZDI). This means moving towards the goal of net zero in the real world – not just in its portfolios. abrdn will seek to achieve this goal through a set of actions, including rigorous research into net zero trajectories, developing net zero-directed investment solutions and active ownership to influence corporates and policy makers.
The goal will be delivered via three pillars of action:
- Decarbonisation: abrdn will track and reduce the carbon intensity of its portfolios. That means continuing to incorporate carbon analysis into the investment process and supporting credible transition leaders and climate solutions. Our equities, credit and quants investments already have the majority of assets with a carbon intensity below benchmark and our Real Estate business has committed to aligning their assets to net zero 2050 pathways.
- Providing net zero solutions: abrdn will increase the proportion of assets flowing into net zero-directed investing solutions. Around 30% of AUM is currently managed in line with net zero 2050. abrdn will aim to increase this by continuing to develop net zero solutions across all asset classes, actively engaging with clients as well as transitioning its fund range to support net zero goals.
- Active ownership: abrdn will continue to vote and engage with its investee companies to drive change and transition real assets. The team will engage with the highest financed emitters across equity and credit holdings seeking transparency on progress against clear transition milestones assessed against relevant standards – such as the Climate Action 100+ net zero benchmark. abrdn will divest from companies where, after two years, it considers insufficient progress has been made against the transition milestones set, unless it’s not in line with the client mandate.
abrdn recognises that sustainable change starts with its own operations. That’s why we are also announcing our own ambitious target of net zero in our operations by 2040.
Stephen Bird, CEO of abrdn said:
“At abrdn we are acutely aware of our obligation to support the drive towards net zero. That’s why I’m pleased we can announce these climate commitments today – both for the investments we manage and our own operations – which build on those we made earlier in the year.”
“But we must be very clear: simply moving our clients’ money out of high-carbon intensity stocks into greener options will not solve the world’s crisis. Decarbonising a portfolio is not the same as decarbonising an industry. To achieve that we need effective engagement with companies because more seismic change will come from backing credible transition firms on their path from high to low carbon intensity.”
“And asset managers cannot operate in a vacuum. Bolder, collective action by governments is desperately needed. Effective incentives in the form of appropriate carbon pricing are absolutely critical to enable capital allocation in line with net zero and to create an investment environment which rewards companies and investors that go green. We also need a proper debate and action on the role of the tax system in the transition. Pricing carbon needs to be focused on changing behaviours, and ensuring a just transition, on a national and global scale.”
This new pledge builds on the commitments abrdn announced earlier this year.
1 Assets initially in scope are Equities, Credit, Active Quants, Real Estate and selected Multi-Asset strategies. More detail on our baseline and implementation approach will be published in a separate target setting paper. abrdn is committed to this decarbonisation path on the expectation that climate policy will strengthen globally and will review its commitments on a regular basis to reflect policy developments and client commitments.