Members of the Net Zero Asset Owners Alliance are expected to exclude greenfield oil and gas infrastructure investments, according to the Alliance’s latest policy statement.
NZAOA represents a significant pool of investment capital. It has 85 asset owner members with a combined $11 trillion in assets under management or ownership. Members include influential private fund investors such as CalPERS, CDPQ, Nippon Life Insurance Company and Pensioenfonds Detailhandel.
Members are expected not to invest in the planning, building or development of upstream oil and gas fields. “Investment should be limited to existing oil fields,” the policy states.
Midstream investments should be limited to brownfield pipeline distribution and storage projects, although “investments in the conversion of gas pipelines to transport hydrogen are acceptable”, the policy states. Greenfield midstream gas infrastructure projects must be aligned with recognised 1.5C pathways.
Downstream, members should not invest in greenfield oil-fired power generation, refineries or petrochemicals. New investments in gas-fired power generation and gas-to-hydrogen production are only acceptable if carbon capture, storage and utilisation facilities are in place at the projects.
The policy is an indication that – despite reports of increased tolerance for fossil fuels prompted by recent concerns for energy access and security – managers raising fossil-fuel-related strategies will struggle to access certain pools of capital.
While members are not expected to exclude brownfield oil and gas assets, NZAOA “strongly caution[s] against investment in long-lived assets that are likely to become stranded in a 1.5C-aligned transition”, in the policy statement. “We underscore the reality that ‘business-as-usual’ investments in oil and gas infrastructure are inconsistent with such a scenario.”
NZAOA’s policy statements and protocols are aimed at supporting asset owners to align their portfolios and investment activities with a 1.5C pathway – limiting global warming to 1.5C, which involves reaching net-zero greenhouse gas emissions globally by 2050. Earlier this year, NZAOA released the third edition of its target-setting protocol, which stipulated that members must ensure “all private equity, infrastructure and real estate funds they make new commitments to are net-zero-aligned” from 2026 onwards.