A group of over 70 global investors representing $16 trillion in assets announced today the launch of the Net Zero Investment Framework, issued through the Institutional Investors Group on Climate Change (IIGCC). The new framework was introduced as a blueprint to help investors maximise the contribution they make in tackling climate change, including decarbonising investment portfolios and increasing investment in climate solutions, as the world approaches the target of net zero emissions by 2050.
Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change, said:
“Countries, cities and companies around the globe are committing to achieve the goal of net zero emissions and investors need to show similar leadership. The willingness is there, but until now the investment sector has lacked a framework enabling it to deliver on this ambition. As we work towards investors adopting the framework before the end of the year, the race is now on in the run-up to COP26 for asset owners and managers to show they will be net zero investors.”
IIGCC stated that the new framework will provide a comprehensive set of recommended actions, metrics and methodologies, with the aim of enabling both asset owners and asset managers to effectively become ‘net zero investors,’ consistent with a 1.5°C net zero emissions future.
The framework will cover 4 specific asset classes, including sovereign bonds, listed equities and corporate fixed income and real estate.
According to the IIGCC, the new framework goes beyond most current portfolio decarbonisation approaches, which tend to focus on portfolio emissions reduction or portfolio temperature targets. The framework utilizes a more comprehensive “investment strategy” approach, with concrete targets set at portfolio and asset level, as well as smart capital allocation, engagement and advocacy to ensure that investors can maximise their climate impact.
IIGCC announced that five pension funds – APG, Brunel, the Church of England Pensions Board, PKA and Phoenix Group – representing AUM of over $1.3 trillion will model the impact of the framework in their portfolios, with the results of this analysis to be released with the launch of the final framework before the end of this year.
Adam Matthews, Director of Ethics & Engagement, Investment Team, Church of England Pensions Board and Co-Chair, IIGCC, Paris Aligned Investor Initiative (PAII), said:
“Setting a long-term net zero target is the easy part; the challenge is to have a credible and transparent framework that enables your fund to convert intent into practical decisions and action. The Church of England Pension fund, which serves the interests of 40,000 future beneficiaries, is globally invested across multiple asset classes and this framework provides us with a basis to deliver our commitment to be net zero aligned.”
Keith Skeoch, CEO, Standard Life Aberdeen, said:
“The transition to net zero is fundamentally an investment transition: shifting capital from high carbon to low carbon alternatives. This innovative framework provides investors with a roadmap to help accelerate this capital shift and support the goals of the Paris Agreement.”
Laura Chappell, CEO, Brunel Pension Partnership, said:
“Investors need to play a central role if the world is to meet the Paris commitment of limiting climate change to below two degrees. The net zero investment framework is of critical importance because it answers the fundamental and urgent question of what a Paris-aligned portfolio actually looks like. For Brunel, the initiative is a core component in how we seek to deliver on the Paris-aligned ambitions we laid out earlier this year, since it helps us to evaluate our portfolios and those of our clients. It is a major step forward for the industry.”
Antonio Lorenzo, Chief Executive of Scottish Widows and Group Director of Insurance and Wealth, said:
“We are proud to have supported IIGCC in this vital piece of work. There are many notable examples in the financial industry of investors seeking to incorporate sustainability into their investment strategies, and for those who are seeking to align their portfolios to the goals of Paris Agreement this initiative helps provide a roadmap of how they can begin this journey.”
Claudia Kruse, Managing Director Global Responsible Investment & Governance at APG Asset Management, said:
“APG invests EUR 512bn on behalf of its pension fund clients, including ABP. In order for us to be able to implement ABP’s net zero carbon ambition and for the industry as a whole to play its role in delivering the Paris agreement, we need to establish the Net Zero Investment Framework as a global industry standard.”
Michael Eakins, Chief Investment Officer, Phoenix Group, said:
“We are very pleased to be participating in and supporting the important work of the IIGCC to help maximise the contribution that the investment community is making towards the decarbonisation of the global economy. As a leading retirement and savings business, Phoenix Group has committed to fostering responsible investment across its investments portfolios. We work closely with our asset management partners, including Aberdeen Standard Investments, to achieve this for our business and for our customers who are investing for their future. This project has given us valuable insights into what the net zero journey for our investment portfolios could look like, and recommends a Framework that will help everyone make the progress that is vital.”
Vicki Bakhshi, Director, Responsible Investment at BMO Global Asset Management, said:
“The next decade is absolutely critical to achieving the Paris Agreement goals and avoiding catastrophic climate change. Investors need to play their part, and for our efforts to be effective, it’s vital that we have a shared understanding of what Paris alignment means, and are able to articulate that to our clients. We are proud to be involved in the framework issued today and to play our part in the wider investor movement towards making finance a force for good.”