Net-zero norms in sustainable finance:what explains asset managers’ target-setting?

A growing number of investors are adopting net-zero targets. Based on semi-structured interviews with 20 asset managers – primarily investing in public equities and fixed-income – this paper investigates the factors influencing target-setting. Novel to the literature, we show that investor coalitions have played a central role in the institutionalisation of net zero, including through the dissemination of “best practice” guidance. However, within our sample, there are significant variations in the degree to which asset managers have aligned with, or even exceeded, this guidance. To make sense of this heterogeneity, we propose a new typology, which distinguishes investors as hedgers, fast followers, and leaders. A combination of internal factors (such as resources and organisational values) and external pressures (including client preferences and regulatory contexts) are found to explain these variations. Our analysis reveals that net-zero target-setting is largely a continuation of asset managers’ past responsible investment practices, shaped by their existing capabilities, beliefs, and client bases. The paper also contributes to practitioner debates by questioning whether investors’ voluntary net-zero targets can fulfil their ambitions in the absence of stronger state regulatory intervention.