Investors managing combined US$33t devising net-zero investing standard

London

A GROUP of investors managing a combined US$33 trillion has developed what it hopes will become the global standard for net-zero investing.

Pension funds and asset managers contributed to the development of the "Net-Zero Investment Framework" through an initiative of the Institutional Investors Group on Climate Change (IIGCC), according to a statement on Wednesday. The idea is to come up with a common approach to decarbonise investor portfolios and the wider economy, and thereby contribute to keeping global warming below 1.5 degrees Celsius, the more ambitious target of the Paris climate accord.

New net-zero announcements have become an almost daily occurrence. So far in March, Wells Fargo & Co, Goldman Sachs Group and Citigroup are among companies that have committed to achieving carbon neutrality - but there is no commonly agreed definition of what that means. Though such pledges imply an understanding of the need to substantially cut greenhouse-gas emissions, without a common standard, there's plenty of latitude for a variety of interpretations.

"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," Adam Matthews, chief responsible investment officer at the Church of England Pensions Board, said in the statement. A practical and credible framework for getting to net-zero "is a vital part of the investment architecture that was missing", he said.

The IIGCC said 35 investors managing US$8.5 trillion are already using the framework, including DWS Group, Pacific Investment Management Co and Fidelity International. In addition, 21 asset owners managing US$1.2 trillion announced commitments on Wednesday to achieve net-zero alignment for their portfolios by 2050.

The net-zero framework is intended to help decarbonise investment portfolios and increase investment in "climate solutions", according to the statement. It encourages investors to develop net-zero strategies for asset allocation, policy advocacy and engaging with portfolio companies.

"Decarbonising our portfolio alone isn't enough," said Barry O'Dwyer, chief executive officer of Royal London Group. "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." BLOOMBERG