PLSA ESG 2022: Investment landscape with sufficient carbon-negative assets ‘is going to take time’

An investment landscape where there are enough carbon-neutral or carbon-negative assets for investors to meet their net-zero commitments is “going to take time”, Aon DC Solutions chief investment officer, Joanna Sharples, has said.

Speaking at a session on net zero at the PLSA ESG Conference 2022, panellists were asked whether there is sufficient stock of mainstream carbon-negative assets to offset assets that produce carbon emissions.

“If we were all trying to go to net zero today, there are not enough carbon-negative assets to go around,” Sharples stated. “That’s one of the big reasons we have a journey, it’s going to take time.”

She added that the journey to net zero gave the opportunity for pension schemes to use their investment strategies and engagement to drive companies towards net zero.

“At the end of the day, we need all the companies we know and love to move with us, and we need them to do our part,” she continued.

“You can use your capital on the one hand, and then you can also engage with them to get them to shift. Overall, the stock of carbon-neutral and carbon-negative assets will increase as companies make that journey.

“With DC there are also some other practical issues. We might be able to do renewables, but how do we access those in a DC context, noting some of the practical challenges – cost liquidity and so on? That might take a bit of time, but I see that as being part of the journey.”

Also speak at the session, Aon head of responsible investment, Tim Manuel, challenged the logic that, by definition, a net-zero strategy had to require some carbon-offsetting.

“Collectively, if we achieve our goal, then by 2050 every asset we invest in has to be carbon neutral,” he stated.

“The collective net-zero commitment has to try to deliver that goal. That’s why its important to think that these are about impact commitments, driving change in the world outside pension funds.

“They’re not about internal accounting and just trying to make sure the book is balanced in terms of the carbon that’s emitted from within the portfolio.”

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