- A step-by-step guide for investors of all sorts to set portfolio targets that will help create stronger decarbonization plans to reach the net zero emissions goal set by the Paris Climate Agreement for 2050.
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It’s like the IKEA instructions of decarbonization plans: a global group of institutional investors representing about 20% of the world’s assets released the first phase of their practical, step-by-step blueprint for getting to net zero emissions by the Paris Climate Agreement’s 2050 deadline.
What makes this announcement different from other commitments (like the one on “stakeholder capitalism” from last year’s Business Roundtable) is that it’s not merely a mission statement. It tells investors exactly what to do to prevent catastrophic climate change. The framework’s authors, led by the Institutional Investors Group on Climate Change (IIGCC), lay out concrete targets at the portfolio and asset class level as well as tools for measuring and reaching them — including the pros and cons of divesting from fossil fuels, as many climate activists demand, and leveraging one’s shareholder position to change polluter behavior.
The phase now out for feedback and consultation covers listed equities, credit, sovereign debt, real estate and strategic asset allocation. A later phase of the framework will look at private equity and infrastructure. Whether the framework will be adopted by the asset managers and their $16 trillion in assets under management is not yet clear — but from now on, no investor can plausibly say that they don’t know how to decarbonize.
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