Investment managers should be focusing on real-world carbon emission reductions to help meet global net-zero 2050 targets, LCP has stated.

The consultancy said it had raised expectations on investment managers when it came to climate goals and felt they should be actively advocating for changes to government policies, financial markets and companies that increase the chances of hitting net-zero global emissions by 2050.

While managers have been required to be signatories of the Net Zero Asset Managers initiative for their products to be eligible for LCP to give them the highest rating since April 2022, the consultancy has now updated its expectations to aim to ensure investment managers are “doing their part” to help mitigate systemic climate risk and not focus solely on risks to individual assets.

LCP added that, crucially, managers should be supporting reductions in real-world carbon emissions and not just focusing on reducing portfolio emissions.

According to the consultancy, this would mean engaging with companies, leaseholders and other stakeholders to achieve real emission reductions, alongside searching for profitable investments in assets that support minimising emissions.

Alongside this, LCP urged investment managers to align portfolios with net-zero pathways, and encourage portfolio companies to set and meet net-zero targets.

“Climate risk is financial risk and, at LCP, we firmly believe that limiting global average temperature rises to 1.5°C is in the best interests of our clients, our industry and our collective future,” commented LCP CEO, Aaron Punwani.

“To get there we need to achieve net-zero global greenhouse gas emissions no later than 2050. Investment managers need to be actively engaging with companies and helping them to align with net-zero goals.

“Simply selling off portfolio assets that are emissions heavy will only serve to kick the can down the road and won’t help real-world emission reduction.”

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