Investor Leadership Network’s new Net Zero Investor Playbook offers an inventory of approaches institutional investors are taking to transition investing and highlights key challenges

The Investor Leadership Network (ILN) has launched a new resource to provide practical assistance to investors and their stakeholders to operationalize their net zero commitments. Created with the support of KPMG LLP, the Net Zero Investor Playbook inventories institutional investors’ current approaches to and highlights the complexity of climate transition investing.

Global organizations have developed a wide range of net zero frameworks, methodologies and tools to help investors design and implement their net zero transition programs. The continuously expanding collection of resources and concurrent advances in underlying climate models, however, have caused some confusion on how best to position portfolios and engage with portfolio companies to deliver on real world carbon emissions reduction.

Institutional investors have a significant role to play in financing long-term, real economy emissions reductions, while also reducing their portfolios’ reported emissions in the near term. This can be a tough balancing act,ILN CEO Amy Hepburn says, “so we’re thrilled to provide investors with guidance on how they might begin to navigate the complexity of transition investing.”

The Net Zero Investor Playbook summarizes of the wide range of approaches to transition investing that investors are taking and categorizes them into four themes:

  1. Portfolio emissions forecasting and target setting
  2. Alignment with broader portfolio construction and risk parameters
  3. Portfolio transition taxonomies
  4. Portfolio holdings’ transition capacity metrics.
Within each of the four themes, the Playbook synthesizes the current landscape of relevant investor-specific frameworks and methodologies, the related implementation challenges being experienced by investors, and anticipated enhancements to available guidance that will assist investors in moving forward. To complement the report’s analysis, case studies from individual ILN members on their customized implementation approaches are featured.

The Playbook is the ILN Climate Change Advisory Council’s fourth open-source resource created by investors, to address various aspects of incorporating climate change risks and opportunities into investment processes.

Maria Montero, Principal in CPP Investment Board’s Sustainable Investment Group and Co-Lead of ILN’s Climate Change Committee says, “We believe navigating the risks and opportunities presented by the whole economy transition required by climate change will be a defining challenge of the 21st century. Investors can play an active role in financing real economy emissions reductions and as a result reduce financed emissions. This report draws on practical case studies from ILN’s membership to provide a helpful overview of approaches that long-term investors, like us, can take to steward our portfolios to net zero.”

Nathalie Wallace, Global Head of Sustainable Investing at Natixis Investment Managers and Co-Lead of ILN’s Climate Change Committee adds, “This report outlines the challenges and key considerations investors need to take into account as they embark on the Net Zero journey. Our work with clients shows that it remains a path riveted with uncertainties and critical decisions. But this Playbook will help investors in their decision-making process to reach their dual objectives of decarbonizing and positioning portfolios to benefit from the powerful investment opportunities driven by the transition to a net zero economy.

Access the full Playbook

For further reading
About the Investor Leadership Network
The Investor Leadership Network was launched at the 2018 G7 to facilitate and accelerate collaboration by leading institutional investors on key issues related to transitioning to a sustainable and inclusive global economy. The CEO-led group comprises 13 global institutional investors representative of all continents and assets classes, with over US$10 trillion in assets under management. Learn more about the Investor Leadership Network by visiting our website and following us on Twitter @ILNinfo.

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