"Investors express caution regarding corporate governance, emphasizing the importance of shareholder interests"
In a significant shift towards sustainable investing, global asset owners are making a strong commitment to cutting portfolio greenhouse gas emissions significantly by 2025 and achieving net-zero emissions by 2050. This trend is reflected in the UK, where investors are actively engaging with companies to support net-zero transitions.
According to JP Morgan's report, two-thirds of the 100 largest asset owners continue to publicly acknowledge the importance of climate change. This commitment is evident in the actions of UK investors, who are proactively engaging with companies in their portfolios to drive emissions reductions.
One such example is Norges Bank Investment Management (NBIM), one of the largest asset managers, which has outlined a comprehensive climate action plan for 2022-2025. The plan emphasizes engagement with high-emission portfolio companies to develop credible net-zero targets and transition plans.
The UK context presents its own challenges, with political changes introducing uncertainty. However, investors maintain climate as a top priority and continue engaging with companies to drive emissions reductions. This approach balances the pressure to divest from carbon-intensive assets with proactive climate stewardship.
The Local Authority Pension Fund Forum (LAPFF), an umbrella body coordinating stewardship efforts across seven LGPS Pools, is seen as having a significant opportunity to lead in the absence of government leadership on climate change. In fact, LAPFF collectively manages more than £300bn in assets.
The focus on individual investment returns, or alpha, has been harmful, as it has taken attention away from tackling climate change at a systemic level. However, speakers at a recent event held in Westminster under Chatham House rules suggested navigating these pushbacks by increasingly making the financial case for investing in the energy transition.
The event, which brought together investors from the UK's Local Government Pension Scheme (LGPS) with asset owners and managers from around the world, also highlighted the growing opportunity for asset managers who stand firm on climate change to tap into growing demand from European asset owners.
Notably, a decision by UK master trust The People's Pension to divest £28bn from US manager State Street had caused ripples in the market, making other managers question their own investments. This move was made by The People's Pension citing stewardship misalignment.
However, concerns were also raised about asset managers not fully committing to rigorous stewardship, which was referred to as potential greenwashing. To address this, the New York City Comptroller has asked all third-party managers for listed market funds to enhance disclosure on climate stewardship.
The UK could soon face challenges from the Reform UK party, which gained a landslide in the May 2025 local elections. Reform UK politicians have described climate change as a "hoax" and aim to cut costs by "scrapping" net zero targets and renewable energy subsidies. Despite this, investors continue to prioritize climate action.
In the face of these challenges, a system-wide approach to tackling climate change was advocated, shifting away from notions of beating the benchmark towards systemic stewardship. Additionally, new guidance and consultations related to climate transition plans emphasize a just transition, putting social considerations at the heart of investors’ strategies.
In conclusion, global asset owners, including UK investors, are committed to ambitious near-term emission reductions and long-term net zero targets, primarily through active engagement rather than wholesale divestments, while adapting to evolving regulatory and political landscapes.
Investors are increasingly viewing climate change as a critical concern for their portfolios, as demonstrated by JP Morgan's report that two-thirds of the 100 largest asset owners acknowledge its importance. In this regard, UK investors are engaging proactively with companies to drive emissions reductions and support net-zero transitions. (science, climate-change, finance, investing)
Recognizing the growing opportunity for asset managers who stand firm on climate change, the Local Authority Pension Fund Forum (LAPFF) collectively managing more than £300bn in assets is seen as having a significant role to play in leading climate action in the absence of government leadership. (environmental-science, finance, investing)
