Asset managers collaborate to create Net Zero Investment Framework

A blueprint for asset managers to maximise their contribution in tackling climate change and achieving net zero emissions by 2050

The Institutional Investors Group on Climate Change (IIGCC) has brought together over 70 global investment firms to publish the Net Zero Investment Framework, a blueprint to align investors with the Paris Climate Agreement

The proposed framework provides investors with a set of recommended actions, metrics and methodologies, which will maximise their contribution in tackling climate change and achieving net zero emissions globally by 2050.

Representing $16trn in assets under management, 70 investment firms came together to work on the new framework including Aberdeen Standard Investments, Aviva Investors, AXA Investment Managements, BMO Global Asset management, Church of England Pensions Board, DWS, HSBC Global Asset management, Impax Asset Management, Jupiter Asset Management, Lazard Asset Management, L&G Investment Management, M&G, Nordea Asset Management, PIMCO, Robeco, Royal London Asset Management and Scottish Widows. The full list can be viewed here.

The Net Zero Investment Framework’s primary objective is to aid investors in decarbonising investment portfolios and increase investment in climate solutions in a way that is consistent with a 1.5°C net zero emissions future.

Investors are encouraged to set targets at portfolio and asset level, combining with smart capital allocation, engagement and advocacy activity, to maximise their impact in driving the transition to a net zero world.

Four asset classes are covered by the framework – sovereign bonds, listed equities, corporate fixed income and real estate – with detailed proposals on how investors can assess and increase alignment with Paris Climate goals.

The framework askes investors to assess five core components to help define its net zero investment strategy. These are objectives and targets, strategic asset allocation and asset class alignment, policy advocacy, investor engagement activity and governance.

“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 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.”

Co-chair of IIGCC and its Paris Aligned Investor Initiative (PAII) Adam Matthews, who is also director of ethics & engagement at the Church of England Pensions Board, added setting a long-term net zero target is the easy part, but 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.”

“The transition to net zero is fundamentally an investment transition: shifting capital from high carbon to low carbon alternatives,” commented Keith Skeoch (pictured), CEO at Standard Life Aberdeen. “This innovative framework provides investors with a roadmap to help accelerate this capital shift and support the goals of the Paris Agreement.”

John David, head of Rathbone Greenbank Investments, said the group has also been involved in the PAII since November 2019.

“Alongside 70 other investors, we have explored what it means for investors to align their portfolios to the goals of the Paris Agreement, developing a comprehensive basis on which both asset owners and asset managers can take effective action to accelerate the transition towards net zero emissions.

“We are delighted that the draft Net Zero Investment Framework has now been published for consultation and is ready to be tested by investors and look forward to applying its findings to our clients’ portfolios.”

He added that investors have an “important role to play in directing capital to support the energy transition”.

Th draft Net Zero Investment Framework has been published today for consultation. Five firms will be putting the framework to the test, by modelling its impact across the performance of their real-word portfolios collectively valued at $1.3trn. The results of this analysis will be launched with the final framework, expected before the end of 2020.


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...