Investors Managing $16 Trillion Establish Net Zero Framework

(Photo Credit: Felix Tchverkin, Unsplash)

Global investors representing more than $16 trillion in assets released a blueprint to help the investment community worldwide contribute to achieving net zero emissions by 2050.

Over 70 investors worked on the new Net Zero Investment Framework through the Institutional Investors Group on Climate Change (IIGCC). The framework provides a set of actions, metrics, and methodologies that enable asset owners and asset managers to become “net zero investors,” according to the group.

The Net Zero Investment Framework offers an investment strategy-led approach supported by concrete targets set at the portfolio and asset level, the group explained. When combined with smart capital allocation plus engagement and advocacy activity, the framework should ensure that investors maximize their role in driving decarbonization, IIGCC said.

“The willingness is there, but until now the investment sector has lacked a framework enabling it to deliver on this ambition,” said IIGCC CEO Stephanie Pfeifer. “As we work toward 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.”

The IIGCC published an initial Net Zero Investment Framework this week, and plans to gather input from a wide range of stakeholders to validate and strengthen it. Currently the framework covers four asset classes: sovereign bonds, listed equities, corporate fixed income, and real estate. The group said that more asset classes are likely to follow.

Five investors plan to test out the framework by modeling how it performs across their actual portfolios, which have a total value of $1.3 trillion, the group noted. Results from this testing, along with a final framework, are expected before the end of this year.

“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,” said Laura Chappell, CEO of Brunel Pension Partnership.