Sustainable Markets Initiative launches net-zero framework

Ensuring investors are not just disinvesting from more difficult sectors

The Sustainable Markets Initiative (SMI) has launched a transition categorisation framework to help asset managers reach net zero.

SMI’s asset manager and owner (AMAO) taskforce, made up of 34 asset managers around the world, will introduce the framework.

Its intention is to categorise assets that fulfil the objectives for a pathway to a net-zero transition, at a company and project level.

The aim is to ensure investors are not just disinvesting from the more difficult sectors, especially in emerging economies.

Hendrik du Toit, founder and chief executive of Ninety One, and SMI and AMAO taskforce member, said the motivation is to “find scalable ways for institutional investors to facilitate the reallocation of capital toward sustainable solutions”.

This can be done, he added, by using capital already invested in companies, and new capital investments directed at climate mitigation and adaptation projects.

du Toit said: “We must accelerate the path to net zero through investment in climate resilience solutions, innovation, clean technologies and by mobilising capital to finance more sustainable investment into the transition. This includes ensuring more transparency and guidance.”

Net-zero investing

The transition categorisation framework identifies five categories of transition assets, four of which qualify as Paris-climate agreement aligned. 

The categorisation enables investment into sectors and regions vital to the net-zero transition.  

The SMI AMAO taskforce is working with climate specialist organisations to support the appropriate metrics, thresholds and timelines required by a company or project to qualify for each transition category. 

The SMI’s Energy Transition Task Force recently developed a transition rating methodology that complements this categorisation and could help determine assets that would qualify for one or more of the categories.