In July 2021, ClearBridge Investments announced it had joined the industry-leading Net Zero Asset Managers Initiative (NZAM), an international group of asset managers committed to supporting the goal of achieving net-zero greenhouse gas emissions globally by 2050. We are proud to be part of a community of over 200 asset management peers, representing over $50 trillion, in this commitment.

The initiative seeks to reduce financed emissions – those associated with an asset manager’s investments – and so aligns with ClearBridge’s existing integration of sustainability-related investment risks such as climate change into our stock selection process. Achieving the goals of NZAM will also require us to build on our experience engaging companies on climate change issues, which we have undertaken for 30+ years in recognition of the urgency of accelerating global decarbonization efforts.

Asset managers in the initiative commit to working in partnership with asset owner clients on decarbonization goals to achieve net-zero by 2050 across all assets under management, set an interim target for the proportion of assets to be managed in alignment with net-zero by 2050, and to review and ratchet up this target every five years until 100 percent of assets are included.

More concretely, to meet these commitments, asset managers will (among other things)

• set interim targets for 2030 for assets to be managed in line with the net-zero goal;

• implement a stewardship and engagement strategy with a clear escalation and voting policy that is consistent with the initiative’s goal; and

• prioritize the achievement of real economy emissions reductions through engaging with portfolio companies to increase their carbon reduction ambitions (as opposed to simply divesting from carbon-intensive companies).

At ClearBridge, we have always engaged on climate-related risks with portfolio companies; in the past year, we have already begun explicitly engaging on net-zero alignment. In our conversations, we are encouraging companies to set ambitious carbon reduction goals that are “science-based,” meaning that the target is in line with emissions reductions needed to collectively achieve the goals of the Paris Agreement.

As part of an annual disclosure and reporting process that begins this year, ClearBridge is developing our Climate Action Plan. This plan will build on our existing climate-related work, including climate risk analysis being part of our ESG integration approach and climate-related engagement being a key engagement topic and priority for the firm. The plan will involve enhanced investment policies, engagement strategies, and portfolio-level climate targets.

Because proxy voting is one way ClearBridge uses its role as large shareholder to drive positive change at portfolio companies, we will be aligning our proxy voting with our NZAM commitment, which will further inform and support our climate-related proxy voting.

NZAM is a new, bold approach to driving decarbonization through the asset management industry. It is ambitious and challenging, and it will require asset managers to significantly increase attention to climate issues. Bolstering transparency and accountability across the investment industry, NZAM is a welcome step forward.

Benedict Buckley
CFA, ClearBridge Investments