The next steps to delivering net-zero global emissions by 2050 are expected to be agreed at COP26 in November 2021. In this guide the PRI and the London Stock Exchange Group outline the collaborative initiatives, frameworks and tools, which investors can use to structure action on climate change, and develop consensus on best practice.
What the guide covers
The guide includes:
- an introduction to developing a response to climate change;
- a review of the eight leading investor initiatives;
- an overview of the key frameworks and tools investors that have been developed to help investors identify, analyse, manage and disclose climate risk and opportunity.
COP26 investor initiatives
| A global campaign to rally leadership and support from businesses, cities, regions, investors for a healthy, resilient, zero-carbon recovery that prevents future threats, creates decent jobs and unlocks inclusive, sustainable growth. |
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| The alliance requires signatories to commit to moving their portfolios to net-zero by 2050. It was launched by UNEP FI and the PRI. Thirty-three investors, with $5.1 trillion in assets, had joined the initiative as of the end of 2020. |
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| Net Zero Asset Manager Initiative | The initiative brings together 30 investment managers that commit to help their asset owner clients decarbonise by 2050. It was launched by AIGCC, IGCC, IIGCC, Ceres, CDP and the PRI, |
Other important investor initiatives
| Initiative name | Description |
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| The longest established initiative was founded in 2017. It aligns investor engagement to encourage the world’s largest emitting companies to take action on climate change and is backed by 545 institutional investors with $52 trillion under management. |
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| An alliance of seven global and regional investor groups that provides a platform for investors to show their support for the Paris Agreement. It provides investors with a set of actions they can take, covering investment, engagement, disclosure and policy advocacy, and counts 1,200 investors as signatories. |
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| The initiative brings together the private equity firms which are actively promoting climate action within their portfolios. | |
| Investor Decarbonisation Initiative |
ShareAction’s campaign group aims to catalyse corporate climate action. It works in partnership with initiatives led by CDP and The Climate Group and is supported by We Mean Business. |
| Paris Aligned Investment Initiative |
The initiative has drawn up a set of best-practice approaches and actions to enable asset managers and asset owners align investment portfolios with Paris and net-zero emissions. |
Frameworks and tools to address climate risk
| Framework or tool name | Description |
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| CDP (Carbon Disclosure Project) |
The project runs a global environmental disclosure system that allows companies, cities, states, regions and investors to report their environmental impact. |
| The Inevitable Policy Response | A pioneering project launched by the PRI, which aims to prepare investors for the risks to their investments posed by an abrupt and disruptive near-term policy response to climate change. |
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A global partnership of financial institutions that is developing a harmonised approach to assess and disclose carbon emissions associated with their loans and investments. |
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PRI signatories are required to report on their responsible investment activities annually, using the PRI’s Reporting & Assessment Framework. This online tool comprises five overall modules, and six covering specific asset classes. |
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A coalition of national and sub-national governments, businesses and organisations working to advance the transition from unabated coal power generation to clean energy. Its PPCA Declaration commits signatories to work towards phasing out coal-fired power plants in the OECD by 2030, and by 2050 in the rest of the world. |
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The G20’s Financial Stability Board set up the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to help identify the information needed by investors, lenders and insurers to appropriately assess and price climate risk and opportunity. |
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| An asset-owner led initiative which assesses companies’ preparedness for the transition to a net-zero economy. The TPI data also underpins the CA100+ Net Zero Company Benchmark. |
Tools developed to primarily support alignment with climate goals
| Tool name | Description |
|---|---|
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The Private Finance Hub supports Mark Carney in his capacity as the Prime Minister’s Finance Adviser for COP26. Dr Carney launched the Private Finance Strategy to build a framework to ensure that every professional decision takes climate change into account. |
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| The EU Taxonomy | The EU taxonomy for sustainable activities is an output of the European Commission’s action plan on financing sustainable growth, published in March 2018. |
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The framework is an output of the Paris Aligned Investment Initiative (PAII), a collaboration involving over 70 asset owners and asset managers with more than $16 trillion in assets, led by IIGCC. The PAII aims to provide consensus on objectives and a clear, transparent set of best practice approaches and actions to enable Paris-aligned/net-zero investment portfolios relevant for both asset managers and asset owners. |
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A partnership between CDP, the UN Global Compact, the World Resources Institute and the World Wide Fund for Nature. It has, thus far, mostly focused on non-financial corporates, helping companies set emissions targets that are in line with holding global warming to well below 2°C above pre-industrial levels. |
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UN-Convened Net-Zero Asset Owner Alliance Draft 2025 Target Setting Protocol |
The inaugural protocol, published in final form (following a public consultation) in January 2021, sets out the Alliance’s four-pillar approach to target setting and reporting for the period 2020 to 2025. |
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The investor guide to climate collaboration: from COP26 to net zero
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