Not All Net Zero Targets Are Equal: Comparing Asset Manager Targets

Cora Buentjen, Richard Perkins, and Rory Sullivan

Despite the recent politicisation of net zero in the US and beyond net zero targets have become a norm in sustainable finance in the last decade. A recent report by ShareAction has shown that over 80% of sampled asset managers have set a long-term net zero target. However, significant variation remains in how asset managers formulate and implement these commitments.

Based on semi-structured interviews with 20 investors conducted during a period of rapidly expanding net zero target adoption, we analysed the drivers behind asset managers’ net zero commitments and the factors influencing their implementation.

The Rise of the Net Zero Norm

The rise of net-zero target setting has been accompanied - and enabled - by the development of frameworks that align portfolio allocations, stewardship activities, and disclosure practices with the goals of the Paris Agreement.

Our research suggests that investor coalitions, such as the Net Zero Asset Managers Initiative (NZAMI), and the Institutional Investor Group on Climate Change (IIGCC) have played a key role in disseminating expectations, codifying best practice and shaping sector-wide standards. These coalitions have also contributed to a growing convergence around the framing of net zero, with investors adopting common templates for target-setting and implementation.

Strategic Responses to the Net Zero Norm

Despite this convergence, asset managers vary considerably in their approach to implementation. In our research, we identified asset managers that have made net zero commitments can be divided into three broad categories:

1.        Leaders

Leaders exhibit a proactive approach, frequently participating in the development of sectoral guidance and frameworks. Their participation in coalitions is strategic, enabling them to amplify their influence and contribute to broader change despite limited individual resources. These firms - often smaller and values-led - demonstrate high levels of alignment with net zero methodologies and pursue climate action as a core organisational priority.

2.        Fast Followers

Asset manager in this group tends to adopt best practice guidance, albeit not as fast as the leaders. While ambitious, these firms often refrain from norm-shaping activities and remain more tentative about potential tensions between climate commitments and fiduciary obligations than leaders do. Fast followers typically possess strong internal capabilities, supportive leadership, and prior experience with responsible investment.  

3.        Hedgers

These asset managers adopt net zero targets selectively, often as a means of reputational risk management rather than substantive alignment with net zero goals. Many hedge their commitments by applying net zero principles only to specific funds or business segments. Their decisions reflect a combination of limited internal resources, diverging pressure from clients and regulatory complexity.

Implications for Practice and Policy

While accusations of greenwashing are frequently levelled at the investment industry, this study suggests a more nuanced reality. Although some asset managers with net zero commitments do exhibit a gap between their commitments and their implementation, this tends to reflect genuine structural and operational constraints rather than deliberate misrepresentation. Crucially, without stable government policy on climate change, the strategic motives for asset managers to implement their net zero targets are likely to weaken which may, in turn, lead to a backtracking on net zero commitments.

The findings underscore the central role of investor coalitions in shaping the net zero landscape - not only by defining expectations but by facilitating peer learning, standardisation and norm diffusion. The research suggests that these coalitions need to continue to work with asset managers, to understand their interests and constraints, and to encourage them to pursue climate action and net zero as core organisational priorities.

--

The article, ‘Net-Zero Norms in Sustainable Finance: What Explains Asset Managers’ Target-Setting?’ by Cora Buentjen, Richard Perkins and Rory Sullivan is available in the Journal of Sustainable Finance & Investment via this link.

To find out more about our climate services for companies and investors including net zero target-setting and reporting visit: https://www.chronossustainability.com/themes