In a recent update, Aviva Investors said it had made strong progress on the interim targets set for its real assets business towards the ultimate goal of reaching net zero emissions by 2040.
Aviva outlined a net zero pathway for its £47 billion ($83 billion) real assets portfolio in January last year including five short-term targets it aims to achieve before the end of 2025.
To date, the firm has made 56 per cent progress on its plan to invest £2.5 billion ($4.4 billion) in low-carbon and renewable energy infrastructure and buildings by 2025 and has progressed 48 per cent on expanding the total renewable energy generation capacity to 1.5 gigawatts.
“Net zero targets must move on from being pledges to attract investor capital and instead be grounded in action if the real assets sector is to fulfil its potential in tackling the climate crisis,” commented Aviva Investors real assets CIO Daniel McHugh.
“The five interim goals of our pathway are arguably the most important aspect of our commitment to net zero. They provide proof points against which our progress can be measured and are designed to give clients confidence in the investments we make on their behalf, and their impact in supporting the transition towards a low carbon future.”
Compared to a 2019 baseline, Aviva has so far achieved a 25 per cent reduction in carbon intensity for direct investments against a targeted 30 per cent reduction by 2025 along with a 6 per cent decrease in energy intensity against a reduction target of 10 per cent.
The firm has already exceeded its goal to deliver £1 billion ($1.76 billion) in climate transition-focused real estate loans by 2025 with £1.04 billion ($1.83 billion) of sustainable lending to date and has launched climate transition strategy to deliver on its commitment to align to Article 8 of the Sustainable Finance Disclosures Regulation (SFDR) framework.
As part of its update, Aviva noted a number of challenges are set to make the transition to net zero more challenging for investors including divergence in the level of disclosure across asset classes and the transparency, availability and accuracy of ESG data.
Ed Dixon, head of ESG, real assets at Aviva Investors, also noted that the focus on net zero had resulted in money chasing sustainable assets with attractive decarbonisation pathways as investors tried to lock-in short-term reductions in the carbon footprint of their portfolios.
“There is also an overreliance on energy performance certificates and green building certifications, neither of which are correlated to energy and carbon intensity,” he added.
“However, if institutional investor capital is to be truly effective in supporting the transition towards a low-carbon future, it must be funnelled into more impact-based investment activities, such as improving existing buildings and infrastructure which underperform when it comes to energy efficiency and their ongoing carbon emissions.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.