Paris Aligned Asset Owners signatories report progress on implementing net zero commitments

  • All reporting signatories demonstrate progress on achieving real economy emissions reductions through mixture of climate solutions, engagement and policy advocacy
  • Strong engagement with asset managers on climate-related financial issues reinforces the importance of engagement and stewardship to asset owners to help achieve net zero goals
  • Paris aligned policy advocacy demonstrates asset owners are walking the talk on asking governments for a supportive policy environment

Wednesday 29 May 2024: Signatories to the Paris Aligned Asset Owners (PAAO) initiative, a global group of 57 asset owners with over $3.3 trillion in assets under management, have reported progress towards meeting their voluntary net zero commitments.

The full report – Paris Aligned Asset Owners 2023 Progress Report – can be viewed here.

Signatories to the initiative were asked to report their individual progress towards the initiative’s 10-point commitment statement in a new survey trialled in 2023. 100% of signatories who responded to the survey[1] said they had made progress on achieving real economy emissions reductions through investments in climate solutions and engagement and stewardship with their asset managers.

Key survey highlights include:

  • Investment in climate solutions (commitment 3): 71% of PAAO signatories have set quantitative targets to increase their allocation to climate solutions, whilst 33% of signatories identified climate solutions as being the most impactful actions and a key driver of decarbonisation.
  • Stewardship and engagement (commitment 6): 95% of PAAO signatories reported to have engaged with their asset managers on climate-related financial issues, indicating strong progress on using this lever effectively.
  • Policy advocacy (commitment 5): 95% of PAAO signatories reported to have undertaken policy advocacy aligned with meeting the goals of the Paris Agreement.

In addition, all PAAO signatories have set 2030 reduction targets which include scopes 1, 2, and 3 emissions.

Asset owners are particularly exposed to the financial risks of climate change, with growing pools of assets invested for the long-term interests of millions of beneficiaries. PAAO is distinctive from other investor initiatives, with the majority of signatories being pension funds and superannuation funds.

Consistent with their fiduciary obligations to clients and beneficiaries to avoid financial risk and to maximise long-term value of assets, PAAO signatories have made individual commitments to transition their investments to achieve net zero portfolio greenhouse gas emissions by 2050, or sooner, drawing on the Net Zero Investment Framework to deliver these commitments.

Members of the PAII Executive Committee said:

“It’s positive to see this level of progress from asset owners, particularly the increasing investment in climate solutions. The results demonstrate that signatory net zero commitments are not just words but are underpinned by tangible actions. The strong signatory response rate demonstrates real credibility and commitment from asset owners.” Stephanie Pfeifer, CEO of IIGCC and chair of the PAII Executive Committee.

“Asset owners occupy a systemically crucial position in aligning financial flows to a net zero emissions economy by 2050. The progress showed here is a positive reinforcement that signatories are working towards delivering on their climate commitments with actions today and are already demonstrating a significant contribution to reducing real economy emissions through their investment strategies, Rebecca Mikula-Wright, CEO of AIGCC and IGCC.

“It’s fantastic to see that almost all signatories have engaged with their asset managers on climate-related financial issues. Stewardship and engagement are a significant lever to drive real economy emissions reductions and therefore this communication to asset managers, that climate action is part of their mandate, is absolutely crucial to asset owners delivering on their net zero commitments.” The Rev. Kirsten Spalding, Vice President of the Ceres Investor Network.

Robust and consensus methodologies are emerging for an increasing number of asset classes. PAAO signatories draw on the Net Zero Investment Framework, the most widely used resource to develop net zero strategies and transition plans by investors. The diversity of signatory responses and actions reinforces the benefits of using the Net Zero Investment Framework and the flexibility it provides to deploy different levers.

In 2023, 46 out of the 56 signatories were asked to report, and 42 signatories submitted their survey within the reporting window, setting a 91% response rate for the first year of reporting.

ENDS

[1] 42 signatories reported via the 2023 survey.

Media contacts

For more information or further comment, contact:

IIGCC: Ross Gillam, Head of Communications – rgillam@iigcc.org

Ceres: Vivan Melody – vmelody@ceres.org

IGCC and AIGCC: Fergus Pitt, Director of Media and Communications – fergus.pitt@igcc.org.au

Editor’s Note:

An enhanced Net Zero Investment Framework set to be released by the end of June, will better support signatories in including more of their portfolio and further asset classes within their net zero investment strategies.

About Paris Aligned Asset Owners

Paris Aligned Asset Owners is an international group of asset owners committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit temperature warming to 1.5⁰C above pre-industrial levels, with low- or no-overshoot. As of May 2024, there are 57 Paris Aligned Asset Owners from Europe, North America, and Oceania.

The group is an outcome of the Paris Aligned Investment Initiative, which was established in May 2019 as a collaborative investor-led forum to support investors in aligning their portfolios and investment activities to the goals of the Paris Agreement. Paris Aligned Asset Owners is governed by a steering group of nine asset owners, supported by four regional investor networks.

The initiative is delivered by four investor networks (AIGCC, Ceres, IGCC and IIGCC), which provide specialist support to signatories in implementing the Net Zero Investment Framework. This includes one-to-one guidance, as well as tailored technical assistance from in-house experts.

 

 

Agriculture, forestry and fisheries reclassified as ‘high impact’ in Net Zero Investment Framework

Originally published by IIGCC

We explain what this reclassification means for investors using the net zero investment framework (NZIF) – the most widely used net zero framework for investors – to develop net zero targets and transition plans.  

In October 2023 the Agriculture, Forestry and Fisheries (AFF) sector was reclassified as ‘high impact’ under NZIF, joining other high impact industries chosen because of the substantial greenhouse gas emissions created during their operations, or when their product is used. Examples of other high impact sectors include mining and oil and gas.

The criteria for a high impact company to be considered ‘aligned’ under the alignment maturity scale as outlined in NZIF – or on track to hit their net zero targets – is more stringent than for those in lower impact sectors. Most notably, high impact companies must possess a well-defined decarbonisation plan and allocate capital in accordance with it. Agriculture, forestry and fisheries companies will now also have to satisfy this additional alignment criteria.

The reclassification of the AFF sector will not affect net zero targets, but it will influence the actions that investors take to achieve their targets.

Dr Adrian Fenton, IIGCC’s Senior Investor Strategies Programme Manager, said: ‘The reclassification of the AFF sector as high impact will require investors who want to achieve their net zero targets to intensify their engagement with portfolio companies associated with the sector.’

Land and Sea

According to the Intergovernmental Panel on Climate Change (IPCC), emissions linked to ‘Agriculture, Forestry, and other Land Use’ account for approximately a quarter of anthropogenic global greenhouse gas emissions – those caused by human activity.

This occurs mainly through tropical forest deforestation, with agriculture accounting for between 10 and 12% of global emissions from 2000 and 2010, according to the IPCC. Land use and land use change accounted for a further 9 to 11%. Importantly, many of the suggested options for mitigating emissions also come from this space, perhaps most significantly through avoided deforestation.  

In the water, fisheries contribute significantly to global carbon emissions. Fishing boats that trawl the ocean floor release ‘as much carbon dioxide as the entire aviation sector’, according to one study from 2021. Destroying marine ecosystems not only decreases the capacity of oceans to absorb carbon, it also releases carbon stored in marine organic matter. Shrimp farms leading to mangrove deforestation is another concerning trend as mangroves offering a vital carbon-storing or sequestration opportunity. 

Protect carbon stocks 

While NZIF mainly focuses on the greenhouse gas emissions associated with the AFF sector, experts increasingly recognise that to effectively reduce these emissions, biodiversity and local livelihoods must also be supported.  

‘Biodiverse ecosystems tend to absorb more carbon and are more resilient to impacts such as droughts, fires, and extreme weather events’, explained Norah Berk, IIGCC’s Senior Programme Manager for Nature: ‘With climate change increasing the frequency and severity of disturbances, supporting biodiverse ecosystems is crucial to protect carbon stocks and maintain the carbon absorption capabilities of ecosystems.’

One way investors can engage with companies in the sector is through Nature Action 100, a new global investor engagement initiative launched and co-led by IIGCC and Ceres which aims to drive greater corporate ambition and action to reverse nature and biodiversity loss. More than 200 investors representing $25 trillion in assets have signed on to engage with a list of 100 focus companies as part of the initiative. 

Over a third of the Nature Action 100 companies are within the AFF sector and many of the remaining companies depend on this sector for major inputs into their products, offering investors an opportunity to engage proactively with the sector to deliver real world emissions reductions.

Participating investors called on companies to complete six key actions, which if achieved, should help lower nature loss and associated greenhouse gas emissions.  

The reclassification of Agriculture, Forestry, and Fisheries as a high impact sector within NZIF will encourage investors to redirect their attention towards the transition risks associated with Agriculture, Forestry and Other Land Use. To address such risks, increased engagement with companies to scale practices that foster resilient ecosystems and sustainable livelihoods will be required. The hope is that initiatives like Nature Action 100 can support this requirement. 

Paris Aligned Asset Owners initiative publishes first Progress Report and initial target disclosures for a further 13 signatories

  • Inaugural Progress Report showcases innovation and best practice amongst asset owners for turning net zero commitments into action.
  • New targets mean 40 asset owners have disclosed initial targets since March 2021.
  • The Paris Aligned Asset Owners comprises 57 signatories representing over $3.3 trillion AUM.
  • Asset owners are typically pension and superannuation funds, often systemically important.

The Paris Aligned Asset Owners initiative (PAAO), an international group of asset owners committed to supporting the goal of net zero greenhouse gas emission by 2050 or sooner, has published its first Progress Report showcasing the steps asset owners are taking to reach their net zero goals.

Alongside the Progress Report, initial target disclosures have also been published for a further 13 asset owners taking the total to 40 since the initiative launched in March 2021. The latest disclosures include targets from asset owners including AP7, Lloyds Banking Group Pensions Trustees Limited and Ilmarinen.

Asset owners are typically pension and superannuation funds, and increasingly occupy a systemically crucial position in the process of aligning financial flows to net zero by 2050.

PAAO is an outcome of the Paris Aligned Investment Initiative, which was established as a collaborative investor-led forum to support investors to align their portfolios and investment activities to the goals of the Paris Agreement. Since 2021, PAAO has been a partner to the UN Climate Champion’s Race to Zero campaign and a member of the Glasgow Finance Alliance for Net Zero (GFANZ).

PAAO signatories draw on the Net Zero Investment Framework, the most widely utilised net zero methodology by financial institutions, to set targets and devise a net zero investment strateg

The PAAO 10-point commitment and signatory progress

The Progress Report, which includes 29 case studies, shows how asset owners are developing a range of strategies and approaches to fulfil the criteria set by the PAAO 10-point commitment. Highlights include:

  • Investment in climate solutions (commitment 3): 98% of PAAO signatories that have disclosed targets have established either a quantitative target or qualitative goal for increasing investments in climate solutions. Despite the absence of an industry standard that can be applied across an investment portfolio, signatories have measured their current allocation and set ambitious quantitative targets ranging from 6% of AUM to 25% of AUM by 2030.
  • Stewardship and engagement (commitment 6): Many asset owners have started to clearly communicate expectations for transitioning to the companies they invest in, including setting timebound milestones. Where specific objectives are not met, escalation is starting to become the norm, as recently shown by the decision to file a case against Volkswagen AG by several PAAO signatories after it refused repeated attempts to reveal crucial information on its corporate climate lobbying activities (see case study p50).
  • Fossil fuels investment policies: 23 signatories that have made disclosures have fossil fuel investment policies in place or under development. The policies vary but often include exclusions of companies that derive a certain proportion of sales or revenues from carbon-intensive activities such as those relating to coal mining, or fossil fuel extraction from tar sands or oil and gas. For example, Dutch pension fund, Pensioenfonds Zorg En Welzijn (PFZW), has set clear time-bound expectations of fossil fuel companies, including a deadline of 2024 for divesting where key criteria is not met (see case study p27).

Investor signatories

Debby Blakey, Chief Executive Officer, HESTA, said: “As the super fund representing those working in Australia’s health and community services sector, the risks and opportunities related to climate change have been a key focus area for HESTA for many years. This initiative provides a rigorous methodology to underpin our targets which provides better transparency and aligns us with international standards. This will improve our own climate-aligned investment practice, and will contribute to collective, accelerated climate action within the broader financial sector.”

Charlotta Dawidowski Sydstrand, Head of ESG, AP7, said: “Achieving real economy emissions reductions, which is at the core of the Paris Aligned Asset Owner commitment, is more urgent than ever given the deepening climate crisis. Among the variety of net zero strategies showcased in the progress report, AP7 provides its perspective on targets and escalation tactics as a universal active owner.”

Adam Matthews, PAII Steering Group Co-Chair and Chief Responsible Investment Officer, Church of England Pensions Board, said: “The Paris Aligned Asset Owners initiative has been an enormously important, practical and collaborative forum for developing best practice for investors committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner. As an asset owner, we will always act in the best interests of our beneficiaries and take decisions independently – however, it has been extremely valuable to see the different approaches taken by other investors, to be able to share what works and to learn as we individually work to achieve our net zero goals.”

Network Partners

Stephanie Pfeifer, CEO, IIGCC, said: “Drawing on the positive momentum of the initiative to date, the Progress Report is a valuable resource for asset owners considering developing a net zero strategy or those looking for inspiration. Looking ahead, we hope to see more asset owners taking meaningful steps towards supporting the net zero transition, including working collaboratively with asset managers to drive innovation across the industry.”

Rebecca Mikula-Wright, CEO, the Asia Investor Group on Climate Change (AIGCC) and the Investor Group on Climate Change (IGCC), said: “The leading pension and superannuation funds are making important progress on getting capital flows to align to the goals of the Paris Agreement. These are systemically important investors, with growing pools of assets invested for the long-term interests of millions of beneficiaries, so they’re particularly exposed to the risks and opportunities of climate change. The data and real world examples in this report show the opportunity that this class of investors have to progress net zero, and their responsibility to do so.”

Mindy Lubber, CEO and President, Ceres, said: “This must be the decade of action if we are to meet our global goal of limiting temperature rise to 1.5 C and avoid more catastrophic climate change. This Paris Aligned Asset Owners Progress Report shows some early implementation of goals by a very important segment of the investment markets – asset owners. It also provides hope as we know their hard work on target setting and methodology are critical action steps.”

ENDS

 

Media contacts

For more information or further comment contact:

Institutional Investors Group on Climate Change (IIGCC): Ross Gillam, Head of Media Relations – rgillam@IIGCC.org

Asia Investor Group on Climate Change (AIGCC): Tammie Kang, Communications Manager – tammie.kang@aigcc.net

Ceres: Barbara Grady, Communications Manager – grady@ceres.org

Investor Group on Climate Change (IGCC): Fergus Pitt, Director of Media and Communications – fergus.pitt@igcc.org.au

 

About Paris Aligned Asset Owners

Paris Aligned Asset Owners is an international group of asset owners committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit temperature warming to 1.5⁰C above pre-industrial levels, with low- or no-overshoot.

The group is an outcome of the Paris Aligned Investment Initiative, which was established in May 2019 as a collaborative investor-led forum to support investors to align their portfolios and investment activities to the goals of the Paris Agreement.

As of November 2022, there are 57 Paris Aligned Asset Owners from Europe, North America, and Oceania.

Paris Aligned Asset Owners is governed by a steering group of nine asset owners, supported by four regional investor networks. Since 2021, the initiative has been a partner to the UN Climate Champion’s Race to Zero campaign and a member of the Glasgow Finance Alliance for Net Zero (GFANZ).

www.parisalignedinvestment.org

First net zero guidance for private equity for GPs and LPs launched by IIGCC

  • IIGCC has developed a new private equity component for the Net Zero Investment Framework (NZIF) first published by the Paris Aligned Investment Initiative (PAII) in March 2021
  • The comprehensive guidance – covering metrics, targets and implementation actions relevant to GPs and LPs – offers a coherent industry-wide approach to net zero
  • For the first time, the component provides a blueprint for GPs to make and implement net zero commitments and allows LPs to incorporate private equity in net zero strategies for multi-asset class portfolios

The Institutional Investors Group on Climate Change (IIGCC) has today published a new component for the Paris Aligned Investment Initiative (PAII)’s Net Zero Investment Framework (NZIF), providing guidance on aligning private equity portfolios with net zero that is relevant to both GPs and LPs.

The addition of this new component is part of a strategy of continued expansion of the NZIF, following its initial launch in March 2021. The new component brings the asset classes covered to five: listed equity and corporate fixed income, sovereign bonds, real estate and private equity.

The NZIF is used by signatories of the Net Zero Asset Managers initiative and the Paris Aligned Asset Owners, outlining a common set of recommended actions, metrics and methodologies to maximise their contribution to achieving net zero emissions globally by 2050 or sooner.

The proposed private equity guidance is now open for public consultation here until 27 February 2022, with the final component expected to be published in Q2 2022.

The most comprehensive private equity guidance currently available, the NZIF component is the first to be relevant to both GPs and LPs and covers scope and implementation in addition to metrics and targets. Specifically, it covers:

  • Scope of portfolio companies to be considered for measurement and management as part of a net zero strategy for private equity
  • Metrics and targets to measure alignment over time
  • Implementation actions to achieve alignment targets and decarbonisation in the real economy.

Importantly for LPs, where asset owners and managers have multi-asset class portfolios, the new private equity component is designed to be integrated with the broader recommendations of the Net Zero Investment Framework 1.0. This will allow the asset class to be incorporated in net zero strategies for multi-asset class portfolios for the first time.

Stephanie Pfeifer, CEO, IIGCC, said: “This is an important step in bringing private markets – an ever-expanding and influential part of financial markets – in line with public markets. When it comes to net zero, private equity is currently a blind spot for institutional investors. We look forward to now seeing how many GPs adopt and are able to use the private equity components as a blueprint to make and implement net zero commitments.”

“Ultimately, the more asset classes that can be incorporated into net zero analysis and strategy, the better chance asset owners and managers have of delivering real-world impact. We will therefore look to add more asset classes to the Net Zero Investment Framework this year.”

Fabio Ranghino, Partner and Head of Strategy & Sustainability at Ambienta, said: “The proposed approach has tried to consider the practical complexities of implementing net zero strategies across the breadth of the private equity sphere and provide actionable suggestions to market participants. We think all GPs, across stages and sizes, should benefit from the guidelines produced and embark with us on the net zero journey, as it requires everyone to contribute.”

Bryn Gostin, Managing Director and Head of Product Development & Strategy and chair of Responsible Investment Committee at Capital Dynamics, said: “The Net Zero Investment Framework for private equity is a catalyst for driving change towards a sustainable future. The guidelines address how GPs and LPs can take meaningful action in aligning investments with the goals of the Paris Agreement and turn pledges into practice.”

James Turner, Investment Manager at Railpen, said: “The Net Zero Investment Framework has already proven extremely valuable in helping us assess our listed equities portfolio against our stated net zero strategy. We are delighted that for the first time we will soon be able add the asset class of private equity to our analysis.”

Helen Hopkins, Senior RI Advisor, USS Investment Management, said: “The existing Net Zero Investment Framework has been very helpful in the development of our net zero strategy for our listed equities portfolio. We are pleased that new guidance on net zero for private equity has now been published.”

The latest addition to the framework was developed by an IIGCC-led working group with input from the Paris Aligned Investment Initiative’s partner networks and their private equity-focused members. The working group co-leads were Bryn Gostin, Managing Director, Head of Product Development & Strategy, Capital Dynamics and Fabio Ranghino, Partner & Head of Sustainability & Strategy, Ambienta.

The consultation document can be viewed here.

 

– ENDS –

Notes to editors

Media contact

Ross Gillam, Head of Media Relations, IIGCC

rgillam@iigcc.org

+44 (0)738 850 6013

About IIGCC

The Institutional Investors Group on Climate Change (IIGCC) is the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low carbon future. IIGCC has more than 375 members, mainly pension funds and asset managers, across 23 countries, with over €51 trillion in assets under management.

IIGCC works to support and help define the public policies, investment practices and corporate behaviours that address the long-term risks and opportunities associated with climate change. For more information visit www.iigcc.org and @iigccnews.

About the Paris Aligned Investment Initiative

The Paris Aligned Investment Initiative is a collaborative investor-led global forum enabling investors to align their portfolios and activities to the goals of the Paris Agreement.

The Paris Aligned Investment Initiative (PAII) was established in May 2019 by the Institutional Investors Group on Climate Change (IIGCC). As of March 2021, the initiative has grown into a global collaboration supported by four regional investor networks – AIGCC (Asia), Ceres (North America), IIGCC (Europe) and IGCC (Australasia).

118 investors representing $34 trillion in assets have engaged in the development of the Net Zero Investment Framework through the Paris Aligned Investment Initiative.

www.parisalignedinvestment.org

10 new investors join the Paris Aligned Asset Owners group, bringing total signatories to 50 with USD 2.8 trillion total assets

01.11.21

  • Paris Aligned Asset Owners group grows to 50 with combined assets under management of USD 2.8 trillion
  • New signatories to the initiative include three significant New York City pension funds and four New Zealand Crown investors, boosting representation from outside of Europe
  • Investors commit to achieving net zero portfolio emissions by 2050 or sooner, engaging with companies and policy makers with this target in mind, and increasing investment in climate solutions
  • Six existing signatories have also published initial net zero targets and objectives for the first time

Ahead of COP26 starting in Glasgow this week, 10 new asset owners have joined the existing 40 signatories to the Paris Aligned Investment Initiative’s Net Zero Asset Owner Commitment.

New signatories include three significant New York City pension funds – the New York City Employees’ Retirement System (NCERS), New York City Teachers’ Retirement System (TRS) and New York City Board of Education Retirement System (BERS) – along with four New Zealand Crown investors – the Accident Compensation Corporation, Government Superannuation Fund, National Provident Fund and NZ Super Fund – as well as Barclays Bank UK Retirement Fund, HSBC Bank Pension Trust and West Midlands Pension Fund in the UK. Following these latest additions, the initiative now includes 50 asset owners, collectively responsible for more than USD 2.8 trillion in assets.

Investors joining the Paris Aligned Asset Owners group will become part of a collaborative, investor-led global forum which supports investors in aligning with the goals of the Paris Agreement. They commit to decarbonising their portfolios by 2050 or sooner, increasing investment in climate solutions and are required to set interim targets and undertake policy advocacy and corporate engagement in line with net zero goals.

Bill de Blasio, New York City Mayor, said: “Climate change poses an existential threat to New York City, and we must do everything in our power to confront this crisis head on. In my State of the City address in January, I urged our pension funds to move to net zero greenhouse gas emissions by 2040 and to increase investments in climate change solutions to USD 50 billion by 2035. Today’s vote by the trustees will help the pension system meet these goals and ensure we have a liveable planet for future generations to come.”

Scott M. Stringer, New York City Comptroller, said: “We must act now and act boldly on climate change to protect the long-term interests of our beneficiaries, the sustainability of our pension investments and the stability and growth of the global economy. Every year, the crisis of climate change becomes more stark and immediate. Achieving net zero emissions is an imperative for investors, businesses and government to maintain economic viability as well as liveable conditions on the planet. As fiduciaries, we must mitigate the tremendous systemic risk that climate change poses to our pension funds and, to do this, we must ensure our investments support limiting global warming below 1.5 degrees Celsius. I thank the trustees for their adopting this commitment.”

Hon. Steve Maharey, Board Chair, Accident Compensation Corporation, New Zealand, said: “Following the Government announcement of new responsible investment framework for Crown Financial Institutions such as ACC, we are announcing new interim targets for both 2025 and 2030 for our investment portfolio. ACC is further committing to a 60 percent reduction in in the carbon intensity of our listed equity portfolio by 2025 compared to a 2019 baseline, and a 65% reduction by 2030. The new targets and joining of the PAII Net Zero Asset Owner Commitment are further evidence of ACC’s intent to be proactive and support a sustainable transition for New Zealanders.

Anne Blackburn, Chair, the Government Super Fund, said: “This announcement represents a significant step forward in climate ambition and portfolio emissions reduction for the Government Super Fund. We’re pleased that the Framework, in setting out the Government’s expectation that we make steady progress towards net zero by 2050, recognises that each fund has a different objective and investment style, and preserves our operational independence.”

Dr Edward Schuck, Chair, the National Provident Fund, said: “NPF supports the Framework and is confident it can align with its ambitions while continuing to act in the financial interest of its schemes’ members. We’re looking forward to collaborating with other investors to see emissions reductions achieved in the real economy.”

Catherine Drayton, Manager of the NZ Super Fund, Chair of the Guardians of NZ Superannuation, said: “Climate change continues to present a long-term risk to investment portfolios and it is clear that commitments to achieve net zero by 2050 and align with a 1.5ºC net zero emissions future are becoming best practice for leading institutional investors. Committing the NZ Super Fund to net zero is consistent with our legislative mandate to invest the Fund in line with best practice portfolio management, our recent shift towards sustainable finance and the New Zealand Government’s commitment to the Paris Agreement.”

Mindy Lubber, CEO and President, Ceres, said: “We commend New York City for its leadership among cities in committing to net zero emissions across its pension investment portfolios by 2040, and joining other major asset owners in the Paris Aligned Investment Initiative. New York City recognizes both the risks and opportunities that the urgency of the climate crisis presents. In planning to double investments in climate solutions over the next four years to USD 8 billion, New York City’s pension funds will be realizing competitive advantages and strong returns to its beneficiaries and the people of this great city.”

Rebecca Mikula-Wright, CEO, Asian Investors Group on Climate Change (AIGCC) and Investors Group on Climate Change (IGCC), said: “The commitment of the four Crown investors is a large market signal for New Zealand and reiterates the importance of investors addressing climate risk and seizing the enormous potential returns that are being created in the net zero transition. IGCC also welcomes the New Zealand Government’s announcement of the Crown Responsible Investment Framework. Sovereign funds in all countries have an important role to play in the transition to net zero emissions and staving off the worst impacts of climate change on our communities and economies.”

In addition, six current Paris Aligned Asset Owners have disclosed their initial objectives and targets ahead of COP26, demonstrating progress towards the development and implementation of their net zero investment strategies. This comes only seven months after the first commitments were made in March 2021, with targets needing to be set within twelve months of joining the group.

Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change (IIGCC), said: “As we head into COP26, it is encouraging to see ongoing commitment from the asset owner community. We continue to see a number of investors making net zero commitments, which is very positive, but with the publication of initial targets from some of our existing signatories, we are also beginning to see these commitments be put into action. There is undoubtedly still work to do, but this is a very important step along path towards net zero.”

 

–          ENDS    –

 

Notes to editors

Full list of new signatories:

Accident Compensation Corporation (NZ), Barclays Bank UK Retirement Fund (UK), Government Superannuation Fund Authority (NZ), HSBC Bank Pension Trust (UK), National Provident Fund (NZ) New York City Board of Education System (BERS) (US), New York City Employee’s Retirement System (NYCERS) (US), New Zealand Superannuation Fund (NZ), Teachers Retirement System of the City of New York (US) and West Midlands Pension Fund (UK).

About the Paris Aligned Investment Initiative

The Paris Aligned Investment Initiative is a collaborative investor-led global forum enabling investors to align their portfolios and activities to the goals of the Paris Agreement.

The Paris Aligned Investment Initiative (PAII) was established in May 2019 by the Institutional Investors Group on Climate Change (IIGCC). As of March 2021, the initiative has grown into a global collaboration supported by four regional investor networks – AIGCC (Asia), Ceres (North America), IIGCC (Europe) and IGCC (Australasia).

118 investors representing $34 trillion in assets have engaged in the development of the Net Zero Investment Framework through the Paris Aligned Investment Initiative.

Paris Aligned Asset Owners group grows to USD 2.35 trillion with new additions from Australia and Europe

20.09.21

  • Paris Aligned Asset Owners group grows to 40 investors with combined assets under management of USD 2.35 trillion
  • New joiners to the initiative include HESTA – the first Australian signatory – as well as number of Danish pension funds, Railpen, Tesco Pension Investment and Elo Mutual Pension Insurance Company
  • Investors commit to achieving net zero portfolio emissions by 2050 or sooner, engaging with this target in mind, and increasing investments in climate solutions
  • Signatories join at the start of Climate Week NYC 2021, boosting membership of the Race to Zero campaign

12 new asset owners have joined the 28 existing signatories to the Paris Aligned Investment Initiative Net Zero Asset Owner Commitment, bringing the total signatories to the initiatives to 40. Among the new signatories include Australian industry superannuation fund HESTA, along with UK-based London Pension Funds Authority, Railpen and Tesco Pension Investment, and European asset owners AP Pension, AP3, AP7, the Church Pension Fund, Elo Mutual Pension Insurance Company, Ilmarinen, Lægernes Pension and PenSam. Following these latest additions, the initiative now includes 40 asset owners, collectively responsible for more than USD 2.35 trillion in assets.

Investors signing up as Paris Aligned Asset Owners will be joining a collaborative investor-led global forum which supports investors in aligning their portfolios and activities with the goals of the Paris Agreement. They will be committing to decarbonise their portfolios by 2050 or sooner, increase investment in climate solutions and will need to set interim targets and undertake advocacy and engagement in line with net zero goals.

Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change, said: “As momentum grows approaching COP26 and the focus on climate-related issues intensifies, we are pleased to see more asset owner investors making net zero commitments. These commitments are incredibly important, and the first step on the path towards investors putting in place a net zero investment strategy. We look forward to working with these asset owners on their net zero strategies and would welcome other climate-conscious asset owners to consider becoming signatories to the Paris Aligned Asset Owners commitment.

Asset owners will be using the Net Zero Investment Framework as a blueprint for aligning their portfolios with a 1.5°C net zero emissions future. The framework supports investors in developing a net zero investment strategy built around five core components: governance and strategy, objectives and targets, strategic asset allocation, asset class alignment, policy advocacy and investor engagement. The framework currently covers four asset classes (listed equity and corporate fixed income, real estate, sovereign bonds), and work is being undertaken through the PAII to include new methodologies and approaches for assessing alignment and support the transition of infrastructure, private equity, hedge funds and derivatives.

Sandra Metoyer, Head of Responsible Investments, AP Pension said: As a responsible investor it is essential that we incorporate considerations for climate-related risks and opportunities in our investment strategy. This benefits not only our clients that we invest on behalf of, but also supports a transition towards a low carbon economy. Our commitment to transition to a net zero portfolio by 2050 through IIGCC’s Paris Aligned Investment Initiative reflects the crucial role we believe investors collectively play in realizing the objectives of the Paris Agreement.

Juha Tuohimäki, Director, the Church Pension Fund said: Signing the Paris Aligned Net Zero Commitment will further strengthen our climate policy on an international level. We actively encourage our asset managers to make public net zero commitments, and need to demonstrate this path.

Hanna Hiidenpalo, CEO, Elo Mutual Pension Insurance Company said: “Climate change is a major systematic risk for the global economy and investment environment. The magnitude of the impacts on the economy and humans depend on the degree to which the climate warms and on the success of the climate change mitigation and adaptation measures. As a pension investor managing significant investment assets, we have a vital role to play in the transition to a low-carbon society. IIGCC’s Paris Aligned Investment Initiative Framework was a helpful and practical toolkit when we were updating our climate strategy roadmap. Getting to net zero is much more than decarbonizing the investment portfolio; investors need to take a holistic approach, invest in climate solutions, and engage with the companies. We will continue our work in line with The Net Zero Investment Framework and would encourage other investors to do the same.

Debby Blakey, CEO, HESTA said:We’re proud to join like-minded global investors committed to achieving net zero by 2050. Climate change represents one of the most significant challenges to the wellbeing of current and future generations. That’s why at HESTA we’re focussed on mitigating the risks of climate change across our portfolio and identifying opportunities as we transition to a low carbon economy. Our comprehensive Climate Change Transition Plan (CCTP) can help protect and enhance the long-term performance of our members’ investments, while driving meaningful change and contributing to a healthier planet and society. There is no doubt that the social, environmental and economic cost of inaction is going to be far greater than the cost of responding to climate change.

Karoliina Lindroos, Head of Responsible Investment, Ilmarinen Mutual Pension Insurance Company said: The Net Zero Investment Framework provides practical best practice guidance and a toolkit for putting climate commitments into practice, and helps us reach our goal of carbon neutral investments by 2035. Climate change represents a systematic risk to the long-term value of our investment portfolio, but on the other hand, investments required to transition to a low carbon economy offer investment opportunities in climate solutions.

Chresten Dengsøe, CEO, Lægernes Pension said:Successfully managing the transition to a low-carbon economy is crucial to our members and the Paris Agreement has therefore been part of our investment policy since 2016. Becoming a signatory to the Paris Aligned Investment Initiative is a natural next step in achieving our goal of a net-zero portfolio by 2050 or sooner and we look forward to working with like-minded investors on decarbonizing our investments.

Robert Branagh, CEO, London Pensions Fund Authority said:Climate change poses a material risk to society, business and so to our investments. As a responsible investor, it’s our duty to mitigate these risks. We’ve made significant progress decarbonizing our portfolio to date following the introduction of climate change policy in 2017. Working closely with our delegated asset manager, Local Pensions Partnerships Investments, we will be developing our net zero action plan over the coming 12 months.

Torsten Fels, CEO, PenSam said: “In PenSam Pension we first and foremost have an obligation to securing our members retirement funds both short and long term. In order to do so we have to align our portfolio with the goals set up in the Paris Agreement and making the decision of committing to net zero by 2050 is the logical next step. This will both guard our members against stranded assets in the portfolio and see them benefitting from the investment opportunities the green transition is bringing forth.”

John Chilman, Chief Executive, Railpen, said:As one of the largest UK funds, Railpen takes great pride in driving climate activism in the pensions space. Our net zero commitments are tangible, clearly defined and integral to delivering on our purpose of securing our members future. Meeting our target will be achieved primarily through emissions reductions, portfolio net zero alignment tracking and reporting, strong governance practices, purposeful stewardship and thoughtful policy interventions, in line with Railpen’s long-standing expertise and heritage.

Ruston Smith, Trustee Chair, Tesco PLC Pension Scheme said:Climate change is a serious, and urgent, concern which represents both a financial risk and opportunity for pension schemes. The Tesco PLC Pension Scheme’s aim for its portfolio of assets to be net zero by no later than 2050 will, we believe, play an important role in managing that risk and opportunity for the Scheme.  The Net Zero Investment Framework will help the Scheme to contribute to this. Becoming a signatory to the Paris Aligned Investment Initiative, Net Zero Asset Owner Commitment, is a clear indication of our aim to address this risk and opportunity, including through the investment in sustainable businesses to support a greener world.

 

– ENDS –

 


Paris Aligned Asset Owners group grows to $1.9 trillion as ABP, National Trust, TPT & others join

08.06.21

  • Paris Aligned Asset Owners group grows to 28 investors with combined AUM of $1.9 trillion
  • Europe’s largest public sector pension fund ABP and National Trust, among six new signatories
  • Investors commit to achieving net zero emission portfolios and increasing investments in climate solutions
  • Initiative included in the United Nation’s Race to Zero campaign

Europe’s largest pension fund ABP, the National Trust for Places of Historic Interest or Natural Beauty, the Church of Sweden, South Yorkshire Pension Fund, Wiltshire Pension Fund and TPT Retirement Solutions collectively representing $617 billion in assets under management – are new signatories to the Paris Aligned Investment Initiative’s, Net Zero Asset Owner Commitment1.

The Paris Aligned Investment Initiative is a collaborative investor-led global forum enabling investors to align their portfolios and activities to the goals of the Paris Agreement. The asset owner Commitment will see the pension funds decarbonise their investment portfolios by 2050 or sooner and increase investment in climate solutions, in line with a 1.5°C net zero emissions future. They must also set interim targets for decarbonisation and investment, and undertake policy advocacy and engagement, and voting in line with net zero goals.

The funds will be using ‘Net Zero Investment Framework’ as the practical basis for delivery, in maximising the contribution they make to tackling climate change2. The six investors making the commitment today join a larger group of 38 existing investors – both asset owners and asset managers – representing $8.5 Tn in assets that are already using the Framework3.

The Paris Aligned Investment Initiative was established in May 2019 by the Institutional Investors Group on Climate Change (IIGCC). As of March 2021, the initiative has grown into a global collaboration supported by four regional investor networks – AIGCC (Asia), Ceres (North America), IIGCC (Europe) and IGCC (Australasia)4. It is also included in the United Nation’s Race to Zero campaign.

Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change, said: “Net zero commitments are vital but must be matched with robust action plans. Growing uptake of the Net Zero Investment Framework ensures more investors are now able to maximise their contribution to the energy transition by adopting a net zero investment strategy.”

Independent analysis, across $1.3 trillion real-world investor portfolios, shows net zero alignment is a no regrets choice with scope for investors to secure notable benefits over a business-as-usual approach to investment5.

The current Framework provides metrics and methodologies for four asset classes (sovereign bonds, listed equity and corporate fixed income and real estate), with work already underway through the Paris Aligned Investment Initiative to establish approaches for infrastructure and private equity. The initiative is today also launching a workstream to define how to align to net zero for derivatives as an asset class, and broadening the scope of strategies and asset classes covered by the Framework, including hedge funds.

Loek Sibbing, board member, ABP, said: “Climate change is one of the biggest issues facing the world today. We at ABP are taking actions in our Responsible Investment Policy to counter it. Much depends on standards to be able to steer in the right direction. The Net Zero Investment Framework commitment will help ABP on our pathway to an effective net zero investment strategy.”

Cliff Speed, Chief Investment Officer, TPT Retirement Solutions, said: “Climate change represents a systematic risk to the long-term value of our investment portfolio and has the potential to reduce the security of our members’ retirement benefits. At the same time, the investment required to transition to a net zero economy presents a significant opportunity to support the expansion of climate solutions.

“Making a commitment to transition our portfolio to net zero by 2050 or sooner and becoming a signatory to the Paris Aligned Investment Initiative, Net Zero Asset Owner Commitment, signals we will continue to allocate capital to sustainable businesses, consistent with our investment objectives.”

Alice Bordini Staden, National Trust Investment Committee Member, said: “As Europe’s biggest conservation charity, we have a responsibility to do everything we can to fight climate change, which poses the biggest threat to the places, nature and collections we care for. The financial sector has a pivotal role in enabling the transition to a low carbon economy: our entire organisation is committed to this mission, not just with positive climate solutions, but also with active stewardship activities to encourage and promote the financial sector’s role in achieving net zero.

“Climate change represents a systematic risk to the long-term value of our investment portfolio and has the potential to reduce the security of our members’ retirement benefits. At the same time, the investment required to transition to a net zero economy presents a significant opportunity to support the expansion of climate solutions.

“Making a commitment to transition our portfolio to net zero by 2050 or sooner and becoming a signatory to the Paris Aligned Investment Initiative (PAII), signals we will continue to allocate capital to sustainable businesses, consistent with our investment objectives.”

Councillor Richard Britton, Chair, Wiltshire Pension Fund Committee, said“As the world transitions to a low carbon economy, Wiltshire Pension Fund has made the vital decision of committing to net zero by 2050 within its investment portfolios. This is in order to safeguard our members’ pensions and enable us to benefit from the opportunities presented by a green economy.”

Gunnela Hahn, Head of Sustainable Investment, The Church of Sweden, said: “To protect our planet and civilization from devastating climate change, we urgently need to decarbonise our economies. The financial industry has a key role in ensuring this happens. Church of Sweden therefore divested from oil, gas and coal in 2009, and are now committed to net zero emissions.”

George Graham, Director, South Yorkshire Pensions Authority, said: “Climate change is the most significant risk facing the value of our pension fund’s investments, and the need to take action on this is urgent. However, the transition to a low carbon economy is also a significant investment opportunity which we can look to exploit for the longer-term sustainable benefit of our scheme members.”

The Paris Aligned Investment Initiative is also now collaborating with the Partnership for Carbon Accounting Financials (PCAF), a rapidly growing collaboration of financial institutions working together to develop a harmonised approach to measuring and disclosing greenhouse gas emissions of loans and investments. PCAF is the leading accounting approach underpinning the Net Zero Investment Framework, and the two initiatives will work together to develop greenhouse gas accounting methodologies for asset classes such as sovereign bonds, accounting for carbon removals/sequestered emissions and technical issues such as aggregation of Scope 3 emissions.

With existing initiatives such as Net Zero Asset Managers providing a basis for asset managers to already commit to net zero alignment, the Paris Aligned Investment Initiative’s Net Zero Asset Owner Commitment was developed for asset owners also looking to put the Framework into practice. Signatories to the commitment become part of the Paris Aligned Asset Owners group.

 

– Ends –


Global framework for investors to achieve net zero emissions alignment launched – $8 trillion investors put it into practice

10.03.21

  • Framework launch sees 22 asset owners committing to achieve net zero alignment.
  • Global investor groups to mainstream ‘net zero investing’, supporting investors with practical approaches to achieving portfolio alignment, through IIGCC’s Paris Aligned Investment Initiative.
  • $1.3 trillion real-world investor portfolio testing shows investors ‘need not wait to act’, with net zero alignment offering scope for significant benefit over business-as-usual.

The Institutional Investors Group on Climate Change (IIGCC) is today launching the ‘Net Zero Investment Framework’, enabling investors to maximise the contribution they make to decarbonisation of the global economy and tackling climate change1. This is achieved by ensuring investment portfolios are aligned with net zero emissions and investors are working in a comprehensive manner to help deliver on the goal of the Paris Agreement to keep global warming below 1.5°C. Building on IIGCC’s existing work to date, the finalised Framework is being published in partnership with other investor groups across North America, Asia and Australasia. It will be rolled out globally as the basis for investors worldwide to implement their net zero strategies.

22 asset owners, with $1.2 trillion (Tn) in assets, have used publication of the Framework to commit to achieve net zero alignment by 2050 or sooner2. The funds in question are drawing on the Framework to deliver these commitments, alongside a number of asset managers who are already working with clients on net zero alignment.

This means 38 investors, managing $8.5 Tn in assets – including both asset owners and asset managers – are already putting the Framework to practical use. Just some of these investors include Scottish Widows, the Environment Agency Pension Fund, NN Group, New York State Common Retirement Fund, Royal London, National Grid UK Pension Scheme, the Church of England Pensions Board, PKA, Brunel Pension Partnership, Northern LGPS (covering the Greater Manchester, Merseyside and West Yorkshire local government pension scheme funds), PensionDanmark, Phoenix Group, AP2, Lloyds Banking Group Pensions Trustees Limited, Nest Corporation, Bundespensionskasse AG, AXA Investment Managers, DWS, Aberdeen Standard Investments, PIMCO, Legal & General Investment Management, Jupiter Asset Management, Robeco and Fidelity International. See notes to editor for a full list of all 38 investors3. The majority of these early adopters participated in creation of the Framework and are taking the first steps to defining an industry standard approach to ‘net zero investing’. They are part of a wider group of more than 110 investors representing $33 trillion in assets, involved in its development through the Paris Aligned Investment Initiative, which was launched by IIGCC in 2020 and is now being taken global4.

“The global investment community has been called on to play its part in the transition to net zero – and it is answering that call,” explains Stephanie Pfeifer, CEO, Institutional Investors Group on Climate Change“This new swathe of net zero commitments from asset owners demonstrates the growing determination from investors to make important decisions to support a net zero and resilient future.”

“Commitments are vital, but only meaningful for the long-term when realised. 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.”

Many asset managers using the Framework have also made net zero commitments through the Net Zero Asset Managers initiative launched in December, which is also delivered by IIGCC and partner investor groups5.

More investor commitments such as those announced today will follow, helping build momentum in the run-up to the United Nations COP26 climate talks, taking place Glasgow in November. The Framework is also expected to be included in the United Nation’s Race to Zero Campaign, following the completion of an independent assessment process currently underway6.

“Investing in a net zero future is key to tackling the climate crisis and unlocking truly sustainable growth. It is actually in the interest of all,” explains Patricia Espinosa, Executive Secretary, United Nations Framework Convention on Climate Change. “I encourage others to join investors already showing leadership in using the Net Zero Investment Framework. The race to a net zero future is on and the benefits it offers are critically important.”

“Bringing climate change to the top of the agenda and ensuring that Britain’s pension investments act on managing climate change risk will not only help the UK reach net zero, but ensure a brighter future for all,” adds UK Minister for Pensions Guy Opperman“In the run-up to COP26, more countries than ever are signing up for net zero. This creates huge opportunities, but also risks, for institutional investors such as pension schemes. That is why we’re the first major economy to legislate to require pension schemes to set targets to manage their own climate risks.”

“I therefore welcome both the ambition and hugely practical guidance contained in this framework, which will help even more institutional investors aim for net zero.”

The Framework enables investors to decarbonise investment portfolios and increase investment in climate solutions, in a way that is consistent with and contributes to a 1.5°C net zero emissions future. Investors do this by developing a ‘net zero investment strategy’ built around five core components of the Framework. These key components are: objectives and targets, strategic asset allocation and asset class alignment, alongside policy advocacy and, investor engagement activity and governance.

The ‘net zero investment strategy’ is also underpinned by three types of targets, as the main metrics to measure effective action7:

  • Portfolio level targets for decarbonisation and investment in climate solutions
  • Timebound portfolio coverage targets for companies and assets to meet net zero or aligned criteria
  • Engagement coverage threshold (>70% emissions in material sectors) ensuring intensive engagement to drive the transition

Investors drawing on the Framework explain:

“We’re proud to support the launch of the IIGCC Net Zero Commitment as founding signatories,” explains   Barry O’Dwyer, CEO, Royal London Group. “The IIGCC commitment reflects our view that decarbonising our portfolio alone is not enough. As institutional investors we must influence the companies we invest in to reduce their emissions and invest in the solutions that will help us realise the goals of the Paris Agreement.”

“Becoming net-zero is the best way we can protect our members’ from the investment risks posed by climate change,” adds Helen Dean, CEO Nest. “The evidence is clear – companies adapting for the low carbon economy should have a better chance of long-term success and profitability.”

“We hope other investors follow suit and use the Net Zero Investment Framework. There are challenges to overcome in developing net zero aligned portfolios, but working together and sharing ideas gives us the best chance of finding the right solutions.”

“The importance of investors contributing to achieve net zero emissions is clear while the economic benefits and investment opportunities of renewables and renovating buildings are becoming even more important,” says Asoka Wöhrmann, CEO, DWS Group. “Guided by the IIGCC framework, DWS is working to ensure that we select the best net zero emissions investment framework that will deliver a positive outcome for the world and our clients.”

“It is easy to make a long-term commitment to be net zero, but the key question is the path you take to achieve it,” adds Adam Matthews, Chief Responsible Investment Officer, Church of England Pensions Fund. “We have jointly chaired this process to pool the expertise and wisdom of the asset owner and fund manager community to create a framework that is both practical and credible and gets you to net zero. This is a vital part of the investment architecture that was missing. As a fund we are committed to using this Net Zero Investment Framework and are delighted to make the Asset Owner commitment today.”

“Climate shocks, like storms and heatwaves, present a material risk to investments,” adds Emma Howard Boyd, Chair, Environment Agency. “We wanted to help Environment Agency Pension Fund members to be part of the solution so we asked them what they wanted and 92% of those surveyed told us they thought it was important the Fund had a net zero target. We have been using the IIGCC framework to help us set out a roadmap to a net zero target. It has helped us think about how our portfolio needs to evolve. The Net Zero Investment Framework is an excellent tool and we would encourage all investors to use it.”

“Asset owners have a vital role to play in supercharging the UK’s transition to low carbon and unlocking the huge benefits the green economy presents for us all,” explains Antonio Lorenzo, Chief Executive of Scottish Widows. “That’s why we’ve set ourselves a target to ensure every penny of our £170bn investments are net zero by 2050 and have signed the IIGCC Net Zero Asset Owners’ pledge.”  

“The IIGCC’s Net Zero Investment Framework, which we helped develop, provides both a flexible and targeted approach to cutting carbon emissions in line with the Paris Agreement. By signing up to the framework, asset owners can send a clear signal to companies and policy makers that they will only back businesses which are actively shifting to a low carbon approach.”

“Climate change poses significant risks and opportunities for the New York State Common Retirement Fund, the markets, and the economy as a whole,” said Thomas P. DiNapoli, sole fiduciary of the New York State Common Retirement Fund. “At the same time, it is becoming clear that efforts to comply with the Paris Agreement are on the rise by countries and companies alike. The actions listed in the Net Zero Asset Owners Commitment provide examples of the sort of forward-thinking ideas investors can use to protect the long-term value of their investments. We have put the Fund in a strong position for a net zero future and strongly encourage others to do the same.”

“The Net Zero Investment Framework provides a much-needed toolkit for putting our commitments into practice,” comments Jenn-Hui Tan, Head of Stewardship and Sustainable Investing, Fidelity International. “Investors need to take a holistic approach to ensure they contribute to the transition to a low carbon economy as reducing the carbon footprint of portfolios is not enough to solve climate change. Fidelity International is actively working on embedding the Framework into our company analysis, stewardship activities and fund range.”

“We are proud to have contributed to the IIGCC’s Net Zero Investment Framework,” adds Rod Paris, CIO, Aberdeen Standard. “As investors we have a critical role to play in achieving net zero emissions globally. As we seek to take tangible action, this innovative framework is extremely valuable as it provides a practical means for developing net zero solutions for our clients and supporting the goals of the Paris Agreement.”

The Framework is intended to provide a practical implementation guide, supporting investors in defining and delivering their own net zero investment strategy. While this process will always be heterogeneous and unique to each investor, the Framework helps inform these approaches based on best practice methodologies and metrics. An increasing number of investors are expected to use the Framework following its publication.

“There is growing momentum behind the transition to net zero across the global economy, including from governments, regulators and companies,” explains Stephen Cohen, designate Head of EMEA and member of the Global Executive Committee, BlackRock. “This shift will drive profound changes for investors. It is our deeply held conviction that climate risk is investment risk, and as markets reckon with these risks, we are already starting to see a significant reallocation of capital. Against this backdrop, the transition to net zero presents investors with a historic investment opportunity, and asset managers and asset owners should consider how to position themselves at the forefront of that transition.” 

The four investor groups are also coming together to drive investor net zero commitments and global uptake of the Framework through the Paris Aligned Investment Initiative. Established by IIGCC at the request of European asset owner investors in August 2020, the initiative will now go global. This collaboration will increase the reach of the initiative and help address the urgency of supporting investors worldwide in driving a shift to ‘net zero investing’ across the sector as a whole.

The investor organisations involved are: Institutional Investors Group on Climate Change (IIGCC) engaging with European investors, Ceres covering North America, the Asia Investor Group on Climate Change (AIGCC) covering Asia and the Investor Group on Climate Change (IGCC) covering Australasia.

Bringing investors together, the Paris Aligned Investment Initiative will be the global forum to support asset owners and managers in setting and delivering on net zero targets. Activity will build on existing collaboration, in providing investors with a best practice standard and consistent approach to net zero alignment across the global investment sector. Work will also continue in expanding the focus of the Framework8.

The urgency of addressing the climate crisis is increasingly understood and achieving net zero emissions is key to success. Momentum is increasingly clear, with nine of the world’s 10 largest economies pledging to reach net zero emissions by mid-century. Investors have a vital contribution to make to this process but have lacked a standardised approach to convert intent into practical decisions and action. The Net Zero Investment Framework fills this gap.

The findings of real-word portfolio testing, using the Framework to assess the impacts of net zero alignment – across five investor funds collectively valued at $1.3 Tn, will also help strengthen the case for further uptake9. The analysis developed by Vivid Economics, shows net zero alignment is a no regrets choice with scope for investors to secure notable benefits over a business-as-usual approach to investment10. This includes the opportunity for significant reductions in exposure to climate-related financial risks and helping ensure investors are best placed to benefit from opportunities that arise as decarbonisation of the global economy continues to gather pace.

IIGCC’s Paris Aligned Investor Initiative has been working with investors since May 2019 with the goal of supporting and enabling investors to commit to and transition to net zero. The UN-convened Net-Zero Asset Owner Alliance is a group of asset owners working in this direction, and issuing interim target-setting milestones starting in 2025. Engagement is taking place between the two initiatives with a view to further aligning approaches to achieving net-zero investment portfolios. Discussions are ongoing and detailed work is about to start.

– Ends –

Supplementary investor comment 

In addition to comments included in the main press release, see below comment from investors on the launch and implementation of the Net Zero Investment Framework. Each of the investors is part of an initial group of investors putting the Framework into practice.

Eva Halvarsson, CEO, AP2: “As investors we have a great opportunity to contribute to the transition through the investments we make and thus we can increase the pace of reaching net zero. At AP2 we are committed to develop our portfolio in line with the Paris Agreement, with the aim of having a net zero portfolio by 2045. To reach this we need to manage the risks, but we also have to make investments that accelerate the transition. At AP2, we last year started a mandate, which invest in sustainable infrastructure that facilitate the transition.”

Guy Matthews, CEO, Sarasin & Partners: “Net zero alignment is a bit like, as the old adage goes, “motherhood and apple pie”. We can all agree that this is a goal we should all get behind. Without it, none of our futures are secure. The challenge is in delivery.

The Net Zero Investment Framework published by the IIGCC today provides a vital roadmap for investors to act. There can be few excuses left for those that turn the other way. A new benchmark has been set for our industry.”

Laura Chappell, CEO, Brunel Pension Partnership: “We are proud to have worked with the IIGCC for some time and to have been involved in the development of the Net Zero Investment Framework. The depth of that partnership was reflected in the recent appointment of Faith Ward as IIGCC Chair.

We are confident that the framework has been effectively designed, having participated in the portfolio testing process. As a result, we believe it will enable us to deliver on our climate ambitions, both in our own funds and in our determination to encourage broader change across the industry.”

Carina Akerstrom, CEO, Handelsbanken: “At the end of 2020 we committed to Net Zero Asset Managers which marked an important step in the work to align our portfolios with the Paris Agreement and contribute to a sustainable future. We are currently finalising our new climate targets and internal guidelines for company engagements, which will be based on the Net Zero Investment Framework. Working together with other investors as we develop tools and reporting will be key going forward in order to deliver in accordance with our commitment.”

Jelle van der Giessen, NN Group’s Chief Investment Officer and IIGCC Board member: “At NN one of our strategic commitments is to contribute to the well-being of people and the planet and therefore we are proud to have contributed to this launch of the Net Zero Investment Framework. We believe that the Framework provides a clear roadmap for investors to help accelerate progress towards a net zero future. We will be using the framework to guide us in further developing the strategy to reach our target of net zero greenhouse gas emissions for our own investment portfolio by 2050.”

Carola van Lamoen, Head of Sustainable Investing, Robeco: “Robeco has been using several tools to address the challenges of climate change for many years in the transition to a low-carbon economy. These range from engaging with companies it invests in to launching client solutions such as the world’s first-ever Paris-aligned fixed income strategies in our efforts to combat climate change and lower the carbon footprint of our investments. The Net Zero Investment Framework is an important new comprehensive framework for delivering on our ambition for net zero emissions by 2050 across all our assets under management. It is the toolbox that brings together our different tools for climate action.”

Abbie Llewellyn-Waters, Fund Manager, Head of Sustainable Investing, Jupiter Asset Management: “We are delighted to be able to draw on the insights and recommendations of the Net Zero Investment Framework to support the alignment of our portfolio with the temperature goal of the Paris Agreement, which is a key requirement for all our investments. The climate emergency is one of the most pressing systemic issues globally and this initiative supports actionable targets and clear reporting to help direct capital in support of a more sustainable future for all.”

Dr. Henrik Pontzen, Head of ESG, Union Investment: “The Net Zero Investment Framework is an important milestone on our way to a sustainable future. In line with this, Union Investment was the first major German asset manager to commit to a complete phase-out of financing for coal while actively and individually engaging with more than 100 coal mining companies. In 2021 we will further strengthen our climate strategy to help forming a climate neutral future.”

Gilles Moec, Group Chief Economist, Head of Research of AXA IM: “We have been among the first asset managers committing to reach net zero greenhouse gas emissions by 2050 across all our assets under management. Leveraging on the objectives and work done as part of our involvement in the IIGCC’s Paris Aligned Investment Initiative, we have recently developed our own Climate Alignment Principles. We will start to incorporate the recommendations of the IIGCC to ensure a whole-of-market transition, through investing in heavily decarbonising companies, alongside the benefits and financial resilience to a range of temperature scenarios created by investing in climate solutions. Measuring tools and KPI monitor our progresses to ensure we are on the right pathway to meet our targets.”

Atul Shinh, Investment Director, Ninety One: “We welcome that the Net Zero Investment Framework identifies increasing the investment in climate solutions as an investment strategy that provides a pathway to net zero emissions. We consider all the companies owned within the Ninety One Global Environment strategy as contributing to this goal. Our approach to managing the fund is aligned with aspects of the Framework’s components relating to setting targets and objectives, and advocacy and engagement.”

Iancu Daramus, Senior Sustainability Analyst, Legal and General Investment Management: “With net zero emissions now a focal point of government action, investors are also stepping up. As part of LGIM’s commitment to help transition clients’ portfolios towards net zero, we will continue to work with trusted partners like IIGCC to help evolve common standards for net zero-aligned investing.”

Notes to Editor

  1. URL link for inclusion in reporting: https://www.parisalignedinvestment.org
  1. A version of the Paris Aligned Investment Initiative, Net Zero Asset Owner Commitment can be found on p28 of the Net Zero Investment Framework. Investors making the commitment are: AP2, Avon Pension Fund, Brunel Pension Partnership, BT Pension Scheme, Bundespensionskasse AG, Church of England Pensions Board, Cornwall Pension Fund, Devon County Council, Environment Agency Pension Fund, Lloyds Banking Group Pensions Trustees Limited, National Grid UK Pension Scheme, NEST Corporation, New York State Common Retirement Fund, NN Group, Northern LGPS (the collective asset pool for the Greater Manchester (GMPF), Merseyside (MPF) and West Yorkshire (WYPF) local government pension scheme funds), Oxfordshire County Council Pension Fund, Pædagogernes Pension, PensionDanmark, PKA, Royal London, Scottish Widows and Sierra Club Foundation.
  1. The list of investors already known to be drawing on the Framework is: Aberdeen Standard Investments, AP2, Avon Pension Fund, AXA Investment Managers, Brunel Pension Partnership, BT Pension Scheme, Bundespensionskasse AG, Church of England Pensions Board, Cornwall Pension Fund, Devon County Council Pension Fund, DWS, Environment Agency Pension Fund, Fidelity International, Handelsbanken, Jupiter Asset Management, Lazard Asset Management, Legal & General Investment Management, LGT Capital Partners, Lloyds Banking Group Pensions Trustees Limited, M&G Investments, National Grid UK Pension Scheme, Nest Corporation, New York State Common Retirement Fund, NN, Northern LGPS (the collective asset pool for the Greater Manchester (GMPF), Merseyside (MPF) and West Yorkshire (WYPF) local government pension scheme funds), Oxfordshire County Council Pension Fund, Pædagogernes Pension, PensionDanmark, Phoenix Group, PIMCO, PKA, Robeco, Royal London, Sarasin & Partners LLP, Scottish Widows, SEB Investment Management, Sierra Club Foundation and Union Investment.
  1. See p31 of the Net Zero Investment Framework and here for a list of investors involved in the Paris Aligned Investment Initiative.
  1. See here for details on the Net Zero Asset Managers initiative and commitment.
  1. See here for more detail on the Race to Zero campaign. 
  1. See p10 of the Net Zero Investment Framework for detail on specific requirements of each target. 
  1. Four different asset classes – sovereign bonds, listed equities and corporate fixed income and real estate – are already covered by the Framework. Others will follow, with two additional asset classes – infrastructure and private equity – already identified and work getting underway. This comes alongside a focus on how investors can align to adaptation and resilience goals of the Paris Agreement.
  1. See here for a full version of the analysis. The investors whose portfolios were used for the modelling are APG, Pension Partnership, the Church of England Pensions Board, PKA and Phoenix Group. They collectively represent over $1.3 trillion in assets under management.
  1. Key takeaways among others from the Vivid Economics analysis include:
  • The Framework achieves its intended purpose: enabling investors to successfully align their portfolios with the goals of the Paris Agreement, without this needing to affect returns across investments.
  • Net zero alignment offers significant reductions in exposure to climate-related financial risks.
  • The process of alignment is achieved at manageable cost to portfolio performance (with no impact on risk-adjusted returns).
  • It enables investors to ensure they can be better positioned to benefit from the opportunities that arise through the transition to an emerging net zero economy.

About Paris Aligned Investment Initiative

The Paris Aligned Investment Initiative is a collaborative investor-led forum to support investors to align their portfolios and activities to the goals of the Paris Agreement, and achieve net zero alignment. The initiative involves more than 110 investors representing USD $33 trillion in assets.

Launched in May 2019 by the Institutional Investors Group on Climate Change (IIGCC), the initiative is now a global collaboration involving three other additional regional investor networks supporting a growing number of investors take action: the Asian Investors Group on Climate Change (AIGCC – Asia), Ceres (North America), and the Investor Group on Climate Change (IGCC – Australasia).

About IIGCC

The Institutional Investors Group on Climate Change (IIGCC), is the European membership body for investor collaboration on climate change and the voice of investors taking action for a prosperous, low-carbon future. IIGCC has more than 275 members, mainly pension funds and asset managers, across 16 countries, with over €35 trillion in assets under management. IIGCC works to support and help define the public policies, investment practices and corporate behaviours that address the long-term risks and opportunities associated with climate change. For more information visit www.iigcc.org and @iigccnews.


North American announcement:

New global effort launches for investors to achieve net zero portfolios in line with the Paris Agreement goals

 

Third largest U.S. pension fund joins forces with 110 investors managing $33 trillion in assets  in participating in the international Paris Aligned Investment Initiative

New framework released to guide asset owners and asset managers in aligning their investments to net zero emissions

BOSTON — The sustainability nonprofit Ceres and investor networks from Asia, Australia and Europe are joining forces in a new international initiative to persuade asset owners and asset managers to commit to transition their investments to achieve net zero portfolio greenhouse gas emissions by 2050 or sooner, and help investors  achieve interim portfolio emissions reduction targets by 2030 or earlier.

Through the Paris Aligned Investment Initiative, the networks are releasing a Net Zero Asset Owners Commitment for asset owners to commit to 10 specific actions to achieve Paris-aligned portfolios, including setting an interim portfolio emissions reduction target by 2030 or sooner. The groups are also publishing a Net Zero Investment Framework to assist both asset owners and managers in using rigorous methodology to align their investments with a net zero future. As of today, the Paris Aligned Investment Initiative involves 110 investors worldwide representing $33 trillion in assets in management. 22 of these investors representing $1.2 trillion in assets are signatories to the Net Zero Asset Owners Commitment. The Net Zero Investment Framework is being put to practical use by 38 major investors managing a combined $8.5 trillion in assets.

Signatories to the Paris Aligned Investment Initaitive’s Net Zero Asset Owners Commitment must commit to 10 actions, including:

  • Transitioning our investments to achieve net zero portfolio GHG emissions by 2050, or sooner;
  • Setting an interim target for 2030 or sooner for reducing Scope 1, 2 and 3 emissions associated with our portfolios and setting a target for increasing investment in climate solutions;
  • Ensuring any direct and collective policy advocacy we undertake supports policy and regulation relevant for achieving global net zero emissions by 2050 or sooner;
  • Disclosing objectives and targets, and publishing a clear Investor Climate Action Plan for achieving these goals as soon as possible, no later than one year from making this commitment, and reviewing and updating targets every five years or sooner;
  • Reporting annually on the strategy and actions implemented and progress towards achieving objectives and targets, and in line with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

The New York State Common Retirement Fund –– the third largest U.S. public pension fund with assets of approximately $248 billion –– is one of the largest investors involved in the Paris Aligned Investment Initiative. Thomas P. DiNapoli, sole fiduciary of the New York State Common Retirement Fund, said, “Climate change poses significant risks and opportunities for the New York State Common Retirement Fund, the markets, and the economy as a whole. At the same time, it is becoming clear that efforts to comply with the Paris Agreement are on the rise by countries and companies alike. The actions listed in the Net Zero Asset Owners Commitment provide examples of the sort of forward-thinking ideas investors can use to protect the long-term value of their investments. We have put the Fund in a strong position for a net zero future and strongly encourage others to do the same.”

While investors around the world are subject to a variety of different investment frameworks and regulations, the actions outlined in Net Zero Asset Owners Commitment serve as guideposts for what investors can seek to achieve within the boundaries of their fiduciary obligations. Alignment with a net zero world can be a significant tool for investors to protect their funds from the risks posed by climate change. Investors are committing not only to address climate risks to their portfolios, but also to pursue investment opportunities in the global transition to net zero emissions.

“The global shift to net zero emissions is one of the biggest investment opportunities of the 21st century,” said Mindy Lubber, CEO and president of Ceres. “Global emissions need to reach net zero by 2050 or sooner to limit the systemic and financial risks of the climate crisis. Asset owners and managers everywhere must align their investments with net zero emissions by 2050 or sooner, with interim portfolio emissions reduction targets for 2030 or earlier. The Net Zero Investment Framework enables investors worldwide to implement the actions needed to transition their investments to net zero.”

The investor networks behind the scaling of the Paris Aligned Investment Initiative are: Asia Investor Group on Climate Change (AIGCC) in Asia, Ceres in North America, Institutional Investor Group on Climate Change (IIGCC) in Europe, and Investor Group on Climate Change (IGCC) in Australia and New Zealand. The launch comes just months after 30 asset managers representing $9 trillion made a similar net zero commitment through the Net Zero Asset Managers initiative.

“This Paris Aligned Investor Initiative will help investors work together on setting targets and taking actions necessary to manage climate risks and to capture the opportunities of the global transition to a net zero emissions economy,” said Kirsten Spalding, senior program director of the Ceres Investor Network. “We expect all investors to step up action to tackle the climate crisis, and we are providing the strong framework, peer support and methodologies they need to do so.”

Additional guidance will be released later this year via The Investor Agenda to help investors worldwide develop and implement robust investor climate action plans. In the near term, Ceres’s invites all asset owners and managers to attend Ceres 2021 for the plenary session “Achieving Paris Aligned Investment Portfolios” at 10:45 am ET on Tuesday, March 23 to learn more about this new global effort.

– Ends –

Editor’s Notes:

  1. To learn more about the Paris Aligned Investment Initiative and the full list of investors involved, go to www.parisalignedinvestment.org.
  2. The Net Zero Asset Owner Commitment can be found here.
  3. The Net Zero Investment Framework can be found here.

About the Paris Aligned Investment Initiative
The Paris Aligned Investment Initiative is a collaborative investor-led forum to support investors to align their portfolios and activities to the goals of the Paris Agreement, and achieve net zero alignment. The initiative involves more than 110 investors representing USD $33 trillion in assets. Launched in May 2019 by the Institutional Investors Group on Climate Change (IIGCC), the initiative is now a global collaboration involving three other regional investor networks supporting a growing number of investors take action: Asia Investors Group on Climate Change (AIGCC – Asia), Ceres (North America), and Investor Group on Climate Change (IGCC – Australia). For more information, go to www.parisalignedinvestment.org.

About Ceres
Ceres is a nonprofit organization working with the most influential capital market leaders to solve the world’s greatest sustainability challenges. Through our powerful networks and global collaborations of investors, companies and nonprofits, we inspire action and drive equitable market-based and policy solutions throughout the economy to build a just and sustainable future. For more information, visit ceres.org and follow @CeresNews.

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