Investment consultants advising $10trn of assets launch new net-zero initiative

The new Initiative will report annually on its progress 

The new scheme is called the Net-Zero Investment Consultants Initiative (NZICI) and its members are Barnett Waddingham, bfinance, Cambridge Associates, Cardano, Frontier, Hymans Robertson, JANA, LCP, Meketa, Redington, Willis Towers Watson and Wilshire.

Collectively, and with the support of the UN’s Principles for Responsible Investment (PRI) and Race to Zero campaign, the members have outlined a string of action points designed to support the global transition to net-zero by 2050 at the latest

The first action point is to integrate advice on net-zero alignment into all consulting services “as soon as practically possible” – within two years. Clients will be supported to identify investment risks from climate change and use a mix of engagement and divestment to align portfolios with a net-zero pathway.

Advice will also be aligned with halving emissions by 2030 against using existing solutions. 2019 has been set as the baseline year for this ambition.

NZICI members have additionally committed to set their own net-zero targets supported with 1.5C-aligned, interim targets, and to work more closely with the wider financial community on climate change. To this latter point, one of the action points commits members to “engaging, independently or as a group, with regulators and policymakers, to facilitate the transition to net-zero carbon emissions, addressing any barriers to our clients adopting and achieving their net-zero targets”.

The NZICI will report progress at least once a year.

“The challenge with getting to net-zero is that it’s a collective action problem,” Cardano’s deputy chief investment officer Keith Guthrie said.

“Net-zero is not properly priced in markets, which is why it warrants attention – in other words, markets are financing investments that remain profitable in the short-term, but are inconsistent with long-term environmental goals aligned with net-zero.

“The focus on net-zero across the investment-value chain including advisors allows us to move the market-as-a-whole, and that’s why it’s helpful to set that out in writing in the form of a commitment. In other words, this is a step beyond financial risk and return characteristics, to focus on driving real change in the global economy.”

Last week, consultancy LCP published a report outlining why half of the UK’s institutional investors are facing “major” climate-related threats that could impact the value of their portfolios.

The launch of the NZICI comes less than two months ahead of COP26. There, one day of the presidency programme has been dedicated to finance.

Sarah George