In today’s rapidly evolving financial landscape, the responsibility of asset managers to address climate challenges has taken centre stage. Take, for instance, a manager overseeing a diverse portfolio. While the firm itself may operate from a sleek, energy-efficient office, the real climate impact lies elsewhere—embedded in the emissions produced by the companies and assets it invests in. These are known as financed emissions.

Financed emissions account for up to 99% of a financial institution’s total emissions, categorised under Scope 3. This staggering statistic highlights the sector’s role not just as financiers but as stewards of global decarbonisation.

With regulators demanding greater transparency, investors prioritising sustainability, and the urgency of climate action increasing, asset managers must face this challenge head-on. Among the available tools, carbon removal stands out as a crucial strategy to navigate these demands effectively.

Why carbon removal matters for asset managers

Addressing financed emissions isn’t just about ticking boxes—it’s about adapting to a new reality. Alongside rigorous emission reduction, carbon removal offers asset managers the opportunity to balance regulatory compliance, investor expectations, and portfolio performance in a way that reductions alone cannot achieve.

Evolving investor expectations

Imagine a limited partner evaluating potential asset managers for a new fund launch. Years ago, they might have been satisfied with a general ESG commitment. Today, they demand clear, measurable climate strategies that address financed emissions.

Asset managers without robust climate action plans are finding themselves excluded from RFPs and manager searches, limiting their growth potential for assets under management (AUM)
Firms demonstrating leadership, especially through the integration of carbon removal, are gaining an edge in an increasingly discerning market

Addressing hard-to-abate emissions

Picture a portfolio with stakes in energy infrastructure or industrial production—sectors critical to economic growth but heavy on emissions. Divesting entirely may seem straightforward, but it often conflicts with fiduciary duties to deliver strong returns.

Carbon removal provides a middle ground, allowing managers to retain high-performing assets while addressing their carbon footprints
By pairing emissions reductions with removal strategies, asset managers can fulfil net-zero commitments without undermining portfolio performance

Keeping pace with regulatory demands

The regulatory tide is rising. From PCAF standards to ISSB frameworks and SEC proposals, the message is clear: disclosure and accountability for financed emissions are becoming mandatory. By staying ahead of the curve and investing in carbon removal now, buyers can proactively stay ahead of future regulation as well, reducing climate and financial risk.

Consider an asset manager facing scrutiny under these frameworks. Without a clear emissions management plan, they risk regulatory penalties and reputational damage. Carbon removal can be the difference between compliance and falling behind:

The PCAF standard requires standardised methodologies for calculating financed emissions, driving changes in investment strategy
ISSB standards and TCFD-aligned recommendations push for comprehensive disclosures, including Scope 1, 2, and 3 emissions
The SEC’s proposed rules demand clear reporting on climate risks and material emissions, raising the bar for transparency

Carbon removal: Why asset managers must act now

Supply-demand imbalance

The clock is ticking. Financial institutions’ 2030 net-zero commitments are accelerating demand for carbon removal, but supply is still limited. Early movers can secure an advantage:

Gain access to high-quality removal projects before competition drives up costs
Build long-term relationships with market leaders in removal technologies
Develop in-house expertise, positioning themselves ahead of the curve as the market matures

Strengthening portfolio resilience

Carbon removal doesn’t just help asset managers—it supports portfolio companies as well. Take a high-growth manufacturing firm. By partnering with an asset manager who offers access to removal projects, they reduce exposure to future carbon pricing and align with regulatory expectations, enhancing their valuation.

Removal solutions prepare companies for inevitable carbon pricing mechanisms
Firms with strong climate readiness are better positioned for growth and reduced transition risks
By enabling these shifts, asset managers strengthen the overall resilience of their portfolios

Gaining competitive differentiation

In an increasingly crowded market, being a leader in climate-focused investment can set an asset manager apart. A clear carbon removal strategy signals to investors that a firm is prepared for the challenges ahead.

Asset managers with credible emissions plans, including removal, are viewed as forward-thinking and trustworthy
Early adoption enhances reputation and credibility, attracting climate-conscious institutional investors

Building a carbon removal strategy for financed emissions

To turn carbon removal from concept to action, asset managers need a structured approach:

Assessing financed emissions baselines: quantify Scope 3 emissions using standardised methodologies to identify priorities
Engaging with portfolio companies: collaborate to integrate removal into decarbonisation plans and support their net-zero transitions
Investing in high-quality removal projects: prioritise initiatives with scalable, measurable outcomes that align with long-term climate goals
Acting early: secure access to removal projects before supply constraints tighten, ensuring cost advantages and strategic positioning
Enhancing transparency: improve disclosures to meet the rising expectations of regulators and investors

The business case for carbon removal

For asset managers, carbon removal is more than just a regulatory obligation—it’s a strategic opportunity. By acting now, firms can:

Meet investor and regulatory expectations with confidence
Address the emissions profiles of high-value but carbon-intensive assets
Mitigate risks tied to future carbon pricing and regulatory changes
Position themselves as leaders in the transition to a low-carbon economy

The path ahead may be complex, but it’s also full of potential. Asset managers who integrate carbon removal today can ensure their portfolios remain resilient, competitive, and ready for the demands of a climate-conscious market. Carbon removal is not just about solving a problem—it’s about shaping a sustainable, profitable future.

Learn more about how Opna supports buyers of carbon removal or contact us at hi@opna.earth