The London-based Institutional Investors Group on Climate Change (IIGCC) has launched a framework that outlines how institutional investors can achieve net-zero portfolios. The group said 22 asset owners, with $1.2 trillion in assets, have used the framework to commit to achieve net-zero alignment by 2050 or sooner.
IIGCC says the Net Zero Investment Framework 1.0 informs investors how to decarbonize their investment portfolios and increase investment in climate solutions. It is designed to provide a basis on which investors can make commitments to reaching net-zero emissions and define strategies, measure alignment, and transition portfolios.
It establishes several components for an effective net-zero investment strategy, with recommendations on the key actions and methodologies investors can use to implement a strategy.
The framework was written mainly from the perspective of an asset owner, who would be expected to consider and use all framework components or ensure asset managers are implementing mandates accordingly. The framework is also intended to be a tool to guide asset manager actions, including supporting the implementation of commitments that are part of the Net Zero Asset Managers initiative, which is a group of international asset managers committed to supporting the goal of net-zero greenhouse gas emissions by 2050 or sooner.
The framework follows five key principles to guide its work:
- Impact. The primary objective is achieving emissions reductions in the real economy. The framework encourages investors to maximize their efforts to achieve the greatest impact possible.
- Rigor. Alignment should be based on sound evidence and data, and should be consistent with the best available science on meeting the temperature goals of the Paris Agreement.
- Practicality. The methods and approaches should be feasible for a range of investors to implement, build on existing work, and be compatible with existing processes or requirements of investors.
- Accessibility. Definitions, methodologies, and strategies should be clear and easily applied, using publicly available information and assessments whenever possible.
- Accountability. Definitions, methodologies, and strategies should allow clients, beneficiaries, and other stakeholders to assess whether investors and assets are aligned with the goals of the Paris Agreement.
The IIGCC said the group of investors already known to be drawing on the framework include AXA Investment Managers, Fidelity International, New York State Common Retirement Fund (NYSCRF), Lazard Asset Management, Nest Corporation, and the Church of England Pensions Board, among several other institutional investors.
“The global investment community has been called on to play its part in the transition to net-zero—and it is answering that call,” Stephanie Pfeifer, CEO of IIGCC, said in a statement. “This new swath of net-zero commitments from asset owners demonstrates the growing determination from investors to make important decisions to support a net-zero and resilient future.”