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, significant variations are found in the degree to which asset managers have aligned with, or even exceeded, this guidance. To understand 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 shown 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.