The Institutional Investors Group on Climate Change (IIGCC) has launched an initiative to compile best practices to assist investors with aligning their portfolios to the aims of the Paris Accord.
The new initiative will provide sector-specific guidance to address the current lack of consensus on the frameworks, methodologies, and data required to decarbonise investor portfolios.
The project will be led by AP2, Brunel Pension Partnership, Church of England Pensions Board, LGPS Central, PKA and TPT Retirement Solutions
According to Adam Matthews, Director of Ethics & Engagement at the Church of England Pensions Board: “There are emerging tools for some asset classes but there is not yet an agreed definition of what being aligned to below two degrees or net zero by 2050 means for a pension fund”.
The guidance will be developed collaboratively through a series of roundtables and stakeholder consultations. Initially, key concepts and approaches will be identified and subsequently tested for feasibility and real-world application.The project will be led by a steering committee of leading European investors that includes AP2, Brunel Pension Partnership, Church of England Pensions Board, LGPS Central, PKA, and TPT Retirement Solutions.
This initiative is largely concerned with the portfolio construction process rather than investment stewardship.
A number of other investor-led initiatives focus on engagement with portfolio companies to improve climate resilience through improved disclosure and the setting of emission targets, the most notable being Climate Action 100+, which IIGCC coordinates.
The initiative also comes as the push for climate reporting is starting to gain momentum, with reporting in-line with the Taskforce for Climate-related Financial Disclosures (TCFD) recommendations due to become mandatory for all PRI signatories beginning 2020.
Commenting on the initiative, Peter Damgaard Jensen, CEO of Danish pension fund PKA said: ““By sharing our knowledge and different experiences, we can make it significantly easier for all pension funds and asset owners to make use of the most feasible approaches and thereby align our investments with the ambitions of the Paris-agreement.”