In brief: Net Zero Asset Owners to phase private debt funds into decarbonisation plans

The Net Zero Asset Owners Alliance has released a draft private debt protocol requiring members to set decarbonisation targets for private debt funds from 2025.

The Net Zero Asset Owners Alliance, which represents $11 trillion in assets, is addressing private debt investments.

The Alliance’s 85 members will be expected to phase in decarbonisation strategies and targets to private debt fund investments from 2025, in line with the terms of the Alliance’s draft fourth target-setting protocol.

The protocol lays out how investors should set decarbonisation targets and report on progress for different asset classes. Members of the Alliance should “begin phasing in targets” on new debt fund investments “where possible” from 2025 and report on decarbonisation progress in this asset class from 2027, the protocol states. The protocol does not provide detail on whether these are net-zero or interim decarbonisation targets. For existing debt fund investments, members should practice “systematic engagement” with fund managers on “carbon reporting and net-zero targets” from 2025.

The draft fourth protocol is open to public consultation.

The Alliance’s members include major private fund investors such as CalPERS, CDPQ, Nippon Life Insurance Company and Pensioenfonds Detailhandel.