Who are the Paris Aligned Asset Owners?
Paris Aligned Asset Owners (PAAO) are an international group of asset owners who have made individual commitments to support the goal of reducing greenhouse gas emissions to net zero by 2050 or sooner, in line with global efforts to limit temperature warming to 1.5⁰C above pre-industrial levels, with low- or no-overshoot. See current signatories.
How is the Paris Aligned Asset Owners initiative governed?
The Paris Aligned Asset Owners initiative is governed by a Steering Group of nine asset owners.
The group is coordinated by four regional investor networks – AIGCC (Asia), Ceres (North America), IIGCC (Europe) and IGCC (Australia/New Zealand) – that support signatories in their individual journeys to align their portfolios and investment activities to the goals of the Paris Agreement.
The Paris Aligned Asset Owners initiative provides a platform for asset owners to set their individual commitment to aligning their portfolios with the goals of the Paris Agreement. The initiative is a partner to the UN Climate Champion’s Race to Zero campaign and a member of the Glasgow Finance Alliance for Net Zero (GFANZ).
Please see the governance page for more information.
What are the benefits of joining?
Align with global standards: PAAO is a UN Race to Zero approved partner and part of the Glasgow Financial Alliance for Net Zero (GFANZ). By joining the Paris Aligned Asset Owners, signatories are opting to make a credible commitment, through a UN-approved process.
Receive robust support: Signatories are supported by their regional investor network and receive one-to-one guidance, as well as tailored technical assistance from in-house experts. Signatories receive specialist support in implementing the Net Zero Investment Framework, a blueprint developed with input from investors that is continuously enhanced and expanded to enable investors to consider how they may decarbonise investment portfolios and increase their investment in climate solutions.
Peer learning: Learn and receive guidance on best practice from peers throughout the implementation process through biannual meetings of signatories, working group meetings, and small group discussions hosted by the local investor network.
Show leadership: Demonstrate ambition to support the transition to net zero by joining an accredited global initiative and being part of the solution.
I have already made a net zero commitment. Can I join the Paris Aligned Asset Owners initiative?
Asset owners that have already set out their own net zero commitment, or are already part of an existing net zero commitment initiative, are still able to sign the Paris Aligned Asset Owner Commitment Statement. The investor networks encourage use of the Net Zero Investment Framework as best practice in aligning portfolios with net zero goals and to participate in activities and working groups provided by the investor networks, to support implementation of their commitment and to share challenges and high-level best practice solutions with peers.
What are the legal considerations around joining Paris Aligned Asset Owners?
As a foundational principle, PAAO does not require or seek collective decision-making or action with respect to acquiring, holding, disposing and/or voting of securities. Signatories are independent fiduciaries responsible for their own investment and voting decisions and must always act completely independently to set their own strategies, policies and practices based on their own best interests and decision making and the overarching fiduciary duties owed to their clients and beneficiaries for long–term value preservation.
The use of particular tools and guidance, including the scope of participation in PAAO, is at the sole discretion of individual signatories.
PAAO facilitates the exchange of publicly available information, but signatories must avoid the exchange (including one-way disclosure) of non-public, competitively sensitive information, including with other signatories, PAAO itself, and its investor networks. Even the exchange of certain information in the context of collaboration can give the appearance of a potentially unlawful agreement; it is important to avoid exchanging information which might result in, or appear to result in, a breach of corporate or competition law.
Signatories may not claim to represent other signatories or make statements referencing other signatories without their express consent. Any decision by signatories to take action with respect to acquiring, holding, disposing and/or voting of securities shall be at their sole discretion and made in their individual capacities and not on behalf of PAAO, its investor networks or their other signatories or members. Signatories must strictly avoid coordination of strategic behaviour between competitors that impacts or is likely to impact competition.
PAAO and its investor networks do not provide investment, legal, accounting or tax advice. PAAO and its investor networks do not necessarily endorse or validate the information contained herein.
The terms of engagement, responsibilities, rights and other information contained elsewhere herein are intended to be interpreted in a manner consistent with the foregoing.
What are the requirements for joining Paris Aligned Asset Owners?
Membership: As of January 2023, asset owners are required to be a member of at least one of the investor networks (AIGCC, Ceres, IGCC, IIGCC) so signatories can be provided with individual support. There is no additional fee for joining the Paris Aligned Asset Owners.
Sign: To join the initiative, asset owners must complete a signatory form and submit it to one of the four regional investor networks (AIGCC, Ceres, IGCC, IIGCC). Submission of the form indicates CEO approval from the joining asset owner for signing up to the Paris Aligned Asset Owner 10-point Commitment Statement.
- Disclose initial targets and objectives, drawing from the Net Zero Investment Framework
- Publish a climate action plan for achieving these goals. The Net Zero Investment Framework and the Investor Climate Action Plans Expectations Ladder sets out a range of actions that asset owners may like to include in their plan. The Expectations Ladder covers four key areas covered in the Commitment Statement – investment, engagement, policy advocacy and disclosure, as well as the cross-cutting area of governance.
Subsequent reporting* – Signatories are asked to:
- Review and upgrade targets every 5 years or sooner.
- Report annually on the strategy and actions implemented and progress made towards achieving objectives and targets. Many asset owners already report on actions taken through other frameworks and processes, such as TCFD and PRI. For Paris Aligned Asset Owners, all efforts are made to minimise duplication of reporting, while maintaining accountability within the initiative. For the 2023 reporting cycle, signatories will report progress via an online survey organized around the 10 points of the Commitment Statement.
*Provided always that information should not be disclosed to the extent it is (1) not publicly available; and/or (2) it is not commercially or competitively sensitive, to be determined by each disclosing signatory prior to disclosure.
What is the Net Zero Investment Framework?
The Net Zero Investment Framework (NZIF) sets out a range of best practice methodologies and actions to support asset owners to deliver on their own commitments, including dedicated guidance for different asset classes. Asset owners can use this framework to set their interim targets and plan actions to achieve net zero.
The framework was developed with extensive investor input and provides key recommendations for how investors can support the global transition to net zero and achieve emissions reductions in the real economy. The recommendations cover five components: governance & strategy; setting targets and objectives; asset class alignment; strategic asset allocation; engagement and stewardship; industry engagement and policy advocacy.
The NZIF maintains flexibility to accommodate a broad range of investors, taking into consideration factors such as the markets in which they operate and regulations they are subject to.
What types of targets should be set?
The Net Zero Investment Framework recommends asset owners set a:
- Portfolio decarbonisation reference target
- Portfolio coverage target
- Investment in climate solutions target
- Engagement threshold target
For more information on target disclosures, please see here.
What do investor targets represent?
Targets are a statement of an investor’s ambition that consider a range of factors and that investors are committed to work towards in good faith. While recognising that external factors such as government policy and the availability of emissions data may affect progress, the Paris Aligned Asset Owner Commitment Statement also encourages investors to take complementary actions to support their interim targets.
These actions include developing and implementing climate action plans, stewardship with portfolio companies and other assets, engaging with policy makers, and reporting on their strategy and progress in line with TCFD recommendations.
Achieving the Paris Agreement requires all actors to be ambitious and set goals that depart from business as usual. The Paris Aligned Asset Owners Commitment Statement is based on the expectation that governments and policymakers will deliver on their commitments to achieve the 1.5°C temperature goal of the Paris Agreement, and in the context of fulfilling their fiduciary obligations to maintain long term shareholder value.