Finance & Investment Circular Economy

$16T Investor Network Develops First-Ever Framework for Net-Zero Investing

The Net Zero Investment Framework aims to maximize investor contribution to decarbonization of global economy, helping keep rise in global temperatures below 1.5°C.

Published 4 years ago | About a 2 minute read

Image: Institutional Investors Group on Climate Change

A new Net Zero Investment Framework provides the first-ever practical blueprint for investors to maximize the contribution they make in tackling climate change and achieving net zero emissions globally by 2050.

Over 70 global investors, representing more than $16 trillion in assets, collaborated to develop the framework as the Institutional Investors Group on Climate Change (IIGCC). It provides a comprehensive set of recommended actions, metrics and methodologies, which — following finalization — will seek to enable both asset owners and asset managers to effectively become ‘net zero investors.’ The framework is a key output of IIGCC’s overarching Paris-Aligned Investing Initiative.

“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 of the 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.”

Last month, we saw major moves from banking giants including Morgan Stanley and BlackRock that illustrate growing buy-in to the need for climate awareness and transparency in big finance.

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The Net Zero Investor Framework takes that baton forward — by aiming to ensure that forward-thinking investors can decarbonize their portfolios and increase investment in climate solutions, in a way that keeps us on the 1.5°C net zero emissions path decreed vital by the IPCC. 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 maximize their impact in driving real-world decarbonization. Four different asset classes — sovereign bonds, listed equities and corporate fixed income and real estate — are covered by the framework, with others to follow.

The initial framework has been published for consultation; and IIGCC is seeking input from a wide range of stakeholders to help validate and strengthen the work to date. Five pension funds — APG, Brunel, the Church of England Pensions Board, PKA and Phoenix Group — will also be putting the framework to the test, by modelling its impact across performance of their real-word portfolios, collectively valued at $1.3 trillion. The results of this analysis will be launched with the final framework, expected before the end of 2020.

Read more about the Net Zero Investment Framework here.