Investment Consultants With USD 10 Trillion Of Assets Under Advice Come Together To Launch Global ‘Net Zero’ Initiative
Twelve investment advisory firms are founding signatories of new Net Zero Investment Consultants Initiative (NZICI).
Signatories make clear commitments, endorsed by the UN’s Race to Zero campaign, towards the goal of global net zero emissions by 2050.
20th September 2021 – Twelve investment consulting firms, responsible for advising institutional asset owners on assets of approximately USD 10 trillion, have today launched the Net Zero Investment Consultants Initiative (NZICI). Through nine specific action points, they commit to supporting the goal of global net zero greenhouse gas emissions by 2050 or sooner.
The initiative, which has been led by some members of the Investment Consultants Sustainability Working Groups in the UK (ICSWG-UK) and US (ICSWG-US), is endorsed by the United Nations Race to Zero campaign and supported by the Principles for Responsible Investment (PRI). The twelve investment consultants are: Cambridge Associates, Barnett Waddingham, bfinance, Cardano, Frontier, Hymans Robertson, JANA, LCP, Meketa, Redington, Willis Towers Watson and Wilshire.
“Earlier this year, Cambridge Associates proudly announced its global carbon neutral accreditation. As investors and stewards of long-term capital, it is also essential that our commitment to sustainability reach beyond the walls of our firm and permeate directly across our work with clients. We are lucky to already be working with several clients that are leading on the full spectrum of what needs to be done from decarbonization to investing in real world solutions and are looking forward to utilizing this expertise across our broader client base,” said David Druley, CEO at Cambridge Associates.
Key influencers of capital allocation: investment consultants’ role in the Net Zero transition
Investment consultants play a crucial role within the savings and investment ecosystem. They provide strategic advice to asset owners, such as pension funds, sovereign funds, endowments, insurers, foundations and family offices in areas, such as investment beliefs and strategy, asset allocation, asset manager selection. They also provide broader education on the long-term investment risks and opportunities related to climate change, such as transition risk, physical risk and stranded assets risk. These firms are often the critical link between asset owners and asset managers, determining which firms and strategies are favoured for selection. Consultants also provide guidance to asset managers about ESG capabilities and climate competence, as well as advising on the development of new investment solutions.
“We welcome the establishment of the Net Zero Investment Consultants Initiative. The initiative underlines the growing awareness that a move to net zero must be realised at every stage and level of the investment process. Investment consultancies have a key role to play in facilitating this shift, by working with their clients to help embed ESG considerations throughout their investment activity. The scope and influence of the founding partners behind the initiative is extensive and sets the tone for the rest of the sector. We encourage other investment consultancies to consider their involvement in positively affecting the shift to net zero and to come together to support this vital work,” said Fiona Reynolds, CEO for the Principles for Responsible Investment.
The commitments developed for the NZICI have been designed to facilitate alignment with the UN-convened Net-Zero Asset Owner Alliance, the Net Zero Asset Managers Initiative and other signatories of the Race to Zero campaign. They will work together with other signatories of net zero initiatives as a member of the Glasgow Financial Alliance for Net Zero (GFANZ).
“We are delighted to announce the launch of Net Zero Investment Consultants Initiative. Assisting and advising asset owners to meet net zero goals through investment choices is crucial in meeting the collective decarbonisation targets. This commitment also cements their role in holding asset managers accountable on stewardship and product innovations. As part of GFANZ, we look forward to working together to make the investment process align to net zero,” said Nigel Topping, High Level Champion for Climate Action at UN Climate Change Conference (COP26).
Clear commitments and timeframes
The NZICI sets out nine actions that investment consultants will take to support the goal of global net zero greenhouse gas emissions by 2050 or sooner, in the context of legal and fiduciary duties and specific client mandates. First among these actions: integrating advice on net zero alignment into investment consulting services as soon as possible, and within two years of making this commitment.
The commitments apply to investment advisory service and business operations. For those consultants which offer discretionary asset management services, the commitments include a pledge to align with the Net Zero Asset Managers Initiative within two years.
The nine actions are as follows:
Within our investment advisory services we will:
- Integrate advice on net zero alignment into all our investment consulting services as soon as practically possible and within two years of making this commitment
- Work with our institutional asset owner clients to identify the investment risks from climate change, highlight the importance of net zero alignment and, where applicable, support our clients in developing policies that align their portfolios to a net zero pathway
- Support efforts to decarbonize the global economy by helping our clients prioritize real economy emissions reductions, reflecting the target of 50% global emissions reduction by 2030 or sooner using existing decarbonization methodologies.
- Assess and monitor asset managers on the integration of climate risks and opportunities in their investment decisions and stewardship and reflect this evaluation in our client recommendations
With respect to our fully discretionary services, we will:
- Align with the Net Zero Asset Manager Initiative as soon as practically possible and within two years of making this commitment
With respect to our own business operations, we will:
- Set emissions reduction targets across all our operational emissions in line with 1.5°C scenarios
Within the wider financial community, we will:
- Where suitable net zero methodologies do not exist, work collaboratively for the benefit of our clients to address these challenges, seeking harmonized methodologies
- Engage, independently or as a group, with regulators and policymakers, to facilitate the transition to net zero carbon emissions, addressing any barriers to our clients adopting and achieving their net zero targets
To ensure accountability, we will:
- Report progress by our firm against the commitments made here at least annually in public domain.
The full commitment is hosted on the Principles for Responsible Investment website and can be found here.