A blueprint for investors to maximise the contribution they make in tackling climate change and achieving net-zero emissions globally by 2050 has been developed with global investors representing more than $16tr in assets, through the Institutional Investors Group on Climate Change (IIGCC).

The Net Zero Investment Framework provides a comprehensive set of recommended actions, metrics and methodologies, which following finalisation, will seek to ensure investors can decarbonise investment portfolios and increase investment in climate solutions, in a way that is consistent with a 1.5C net-zero emissions future.

An ‘investment strategy’ led approach, supported by concrete targets set at portfolio and asset level – combined with smart capital allocation, and engagement and advocacy activity – ensure investors can maximise their impact in driving real-world decarbonisation. Four different asset classes – sovereign bonds, listed equities and corporate fixed income and real estate – are covered by the framework, with others to follow.

“Countries, cities and companies around the globe are committing to achieve the goal of net-zero emissions and investors need to show similar leadership,” explains Stephanie Pfeifer, CEO, IIGCC. “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.”

Five pension funds will be putting the framework to the test, by modelling its impact across performance of their real-word portfolios collectively valued at $1.3tr. The five pension funds include APG, Brunel, the Church of England Pensions Board, PKA and Phoenix Group. The results of this analysis will be launched with the final framework, expected before the end of 2020.

The focus on real-world decarbonisation throughout the framework hopes to overcome the limitations of some other approaches that are based only on portfolio emissions reduction or portfolio temperature targets, and which leave room for investors to technically meet targets while selling on the problem.

The Framework is a key output of IIGCC’s overarching Paris Aligned Investing Initiative (PAII). Established at the request of European asset owners, it includes an asset owner steering committee and four issue specific working groups, each with their own dedicated investor leads. PAII looks to establish key definitions and concepts relating to the alignment of investment strategies to the Paris Agreement, including the key goal of reducing emissions in line with pathways consistent with global net-zero emissions by 2050.

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