A post-GFANZ Climate Agenda: Asset owners can lead the shift from portfolio decarbonisation to systemic risk management

The next era of sustainable finance will be defined less by the asset managers with the loudest public commitments and more by the asset owners quietly exercising the powers they have always possessed.

The ESG backlash has exposed the political vulnerability of investor action on climate change. Faced with lawsuits, state-led blacklisting of financial firms and coordinated political attacks, many of the largest global asset managers have retreated from the public climate commitments that defined the GFANZ era.

But the deeper challenge may be intellectual rather than political.

For much of the GFANZ era, sustainable finance was built on two assumptions: first, that investors had more influence over decarbonisation than they actually do; and second, that portfolio decarbonisation would translate into real-economy decarbonisation.

We now know the limits of both.

Climate outcomes are primarily shaped by government policy, industrial strategy, infrastructure deployment and by technological innovation. Investor action to reduce portfolio emissions does not translate into real-economy emissions reductions without changes to those inputs.

The lesson is not that sustainable finance has failed. It is that investors need a new climate agenda – one focused on the areas where they have genuine leverage.

The rise of the asset-owner agenda

The most important shift in sustainable finance today is not happening among asset managers. It is happening among the pension funds, sovereign wealth funds and other long-term investors that sit above them.

As “universal owners”, they cannot diversify away from the effects of climate change, biodiversity loss, geopolitical instability or technological disruption. Their long-term returns depend on the health of the overall economic system.

That gives them a unique incentive to manage long-term, systemic risks.

Understanding systemic risk

Norges Bank Investment Management (NBIM), which manages Norway’s $1.8 trillion sovereign wealth fund, offers one of the clearest examples of this in action.

Recent analyses by both A4S and Carbon Tracker highlight NBIM’s increasingly sophisticated approach to climate risk. Rather than relying on a single climate model, NBIM combines top-down macroeconomic analysis, bottom-up company analysis and narrative stress testing.

One recent stress test explored a scenario in which extreme weather events triggered simultaneous crop failures, food price shocks and supply-chain disruption. NBIM estimated that such a scenario could lead to a 20% drawdown across the fund, with equities falling by 24%.

The significance is not the number itself. It is the mindset behind it. The question is no longer: “How do we reduce portfolio emissions?” It is: “How resilient is our portfolio to systemic shocks that could reshape the global economy?”

Holding managers to account

Understanding risk is only the first step. The more important question is what asset owners do with that understanding. This is where some of the most interesting developments in sustainable finance are taking place.

Leading asset owners are becoming more explicit about the expectations they place on external managers – not through informal signalling, but through mandates, manager selection and performance assessment.

APG has integrated stewardship expectations into manager oversight and investment governance, treating active ownership as part of long-term value creation rather than a standalone ESG activity. Railpen publishes detailed stewardship priorities, asks managers to explain how voting and engagement support those priorities, and holds regular performance reviews to assess delivery. Meanwhile, the Universities Superannuation Scheme (USS) has used enhanced scenario analysis to reshape asset allocation – increasing inflation protection and portfolio resilience in response to the risks it identified.

This shift is also happening collectively. In 2025, 26 major asset owners representing around £1.2 trillion launched the Asset Owner Statement on Climate Stewardship, setting out common expectations for the asset managers they employ. Rather than another voluntary commitment, the statement defines what clients expect managers to deliver – from systematic proxy voting and well-resourced stewardship teams to stronger policy engagement and a clearer theory of change for company engagement.

The policy question

The most important implication of this shift is that climate leadership is becoming less about portfolio targets and more about shaping the conditions for economy-wide transition.

Investors cannot build electricity grids, reform planning systems or implement carbon pricing. But investors can support the policies, market structures and disclosure frameworks that make transition possible.

For asset owners, this may be the most underused lever of all.

If climate change is a systemic risk that threatens long-term beneficiary outcomes, then supporting effective climate policy is not a distraction from fiduciary duty. Increasingly, it looks like part of it.

A smaller but more powerful vision

The next era of sustainable finance may look less ambitious than the last. There may be fewer headline commitments, fewer net-zero announcements and less emphasis on portfolio emissions.

Yet it could ultimately prove more effective because it is built around a simpler and more realistic principle: investors should focus on the areas where they have genuine influence.

For asset owners, that means understanding systemic risk, shaping asset-manager incentives and supporting the policy frameworks on which sustainable prosperity depends.

This is not a retreat from sustainable finance, but a clearer vision for the next chapter – one focused on those with the strongest incentives to manage systemic risks and on their real leverage over sustainability outcomes.