Major investors apply net-zero alignment framework to $8trn of assets

Among the first adopters of the Institutional Investors Group on Climate Change’s (IIGCC) framework are Scottish Widows, Aberdeen Standard, Brunel, Nest, Legal & General Asset Management, the Church of England Pensions Board and the Environment Agency Pension Fund. Collectively, the 35 initial adopters are applying the model to $8trn of assets.

The framework was first trialled in real-world scenarios in the second half of 2020, on portfolios totalling $1.3trn. It is designed to help investors assess how and when to divest from high-emitting companies without credible decarbonisation plans; engage with companies that are developing such plans, and invest in more projects and companies providing climate solutions on the road to net-zero.

To support investors to simultaneously drive progress across these approaches, the framework provides advice on developing both interim portfolio targets and interim targets for specific asset classes, to underpin longer-term net-zero goals.

The framework also helps investors to ensure that their own policy advocacy is in line with the Paris Agreement’s aims and that the companies in their portfolios are not lobbying in ways that undermine their internal climate commitments.

The first 35 firms to apply the framework are AP2, Avon Pension Fund, Brunel Pension Partnership, Bundespensionskasse AG, Church of England Pensions Board, Cornwall Pension Fund, Devon County Council, Environment Agency Pension Fund, Lloyds Banking Group Pensions Trustee Limited, National Grid UK Pension Scheme, Nest, New York State Common Retirement Fund, NN Group, Northern LGPS, Oxfordshire County Council Pension Fund, Pædagogernes Pension, PensionDanmark, PKA, Royal London, Scottish Widows and Sierra Club Foundation.

“Net-zero commitments are vital, but only meaningful for the long-term when realised,” the IIGC’s chief executive Stephanie Pfeiffer said.

“The net-zero transition itself requires an ongoing transition from making commitments to delivering impact. The Net Zero Investment Framework, developed with and for investors, is a blueprint for action that will enable and support investors in reaching these goals.”

Snowball effect

Pfeifer noted that a “swathe” of new net-zero commitments have been made by asset owners in recent months, as the sector “answers the call to play its part” in the low-carbon transition.

Here in the UK, net-zero roadmaps have been outlined by asset owners including Scottish Widows, Legal & General Real Assets, Orchard Street and Aviva in recent weeks.

The trend towards net-zero has been gaining traction in the US even more rapidly since Biden was sworn in as President earlier this year. Wells Fargo, Citigroup, Goldman Sachs and Bank of America have all set new targets on net-zero financed emissions since the start of February, building on similar commitments from JP Morgan Chase and Morgan Stanley late last year.

The US is in the early stages of legislating for a 2050 net-zero target. The target is included in the, Climate Leadership and Environmental Action for our Nation’s Future Act, which was introduced to the House of Representatives last week.

Sarah George

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