first_imgThe results of this analysis will be launched with the final framework, which is expected to be out before the end of this year.“Setting a long-term net zero target is the easy part, the challenge is to have a credible and transparent framework that enables your fund to convert intent into practical decisions and action,” said Adam Matthews, director of ethics and engagement at the Church of England Pensions Board and co-chair of the PAII.Speaking to IPE, he said those involved felt the framework was “a hugely important piece of work”.Claudia Kruse, managing director, global responsible investment and governance at APG Asset Management, which co-chairs the PAII, said the Net-Zero Investment Framework needed to be established as a global industry standard.Primary objective: real-world decarbonisationThe framework covers four different asset classes – sovereign bonds, listed equities, corporate bonds and real estate – with infrastructure and private equity to be added in a second phase.It identifies five components of an effective net-zero investment strategy – objectives and targets, strategic asset allocation and asset class alignment, policy advocacy, investor engagement activity, and governance – and recommends a comprehensive set of actions, metrics and methodologies. “The framework overcomes limitations of other approaches that leave room for investors to technically meet targets while selling the problem to someone else”More than 25 different methodologies and tools were assessed in the development of the framework, with those considered best fit approaches included.The PAII followed five key principles to guide its work, and to assess methodologies and test conclusions: impact, rigour, practicality, accessibility, and accountability.According to the IIGCC, the focus on driving real-world decarbonisation “overcomes limitations of other approaches that leave room for investors to technically meet targets while selling the problem to someone else”.“This falls short in delivering additional meaningful long-term emission reductions,” it said.Vicki Bakhshi, director in the responsible investment team at BMO Global Asset Management, was involved in the PAII working group on listed equities and corporate fixed income and said that although there were many climate change-related initiatives and methodologies in the market, the PAII framework was the first to bring these together.“It’s a way of piecing all that together for a much more comprehensive strategy across asset classes,” she said.Tools that the framework leans on include the Transition Pathway Initiative and the EU’s “taxonomy” of environmentally sustainable economic activities, which the framework says should be used, to the extent possible, as the basis for targets for allocation to climate solutions.‘No excuses’According to the consultation document, the intention is that once the framework is finalised, investors would adopt it on an “implement or explain” basis, to take account of specific strategies where certain elements may not be applicable.“We really encourage investors to implement the framework as soon as possible,” said Stephanie Pfeifer, CEO of the IIGCC. “There’s no excuses not to do something immediately and certainly no time to waste.”The IIGCC is asking for feedback on the framework by 25 September.It is also launching a second phase of PAII work, aimed at expanding the framework to include infrastructure and private equity, and to address technical issues, such as identifying and measuring material Scope 3 emissions and assessing the potential for methodologies that capture relative impact of climate solutions investment.Besides APG and Church of England Pensions Board, the PAII steering committee include representatives of AP2, Brunel Pension Partnership, LGPS Central, Lloyds Banking Group Pensions Trustees, PKA and TPT Retirement Solutions.The PAII consultation document can be found here. A major collaborative process overseen by some of Europe’s best-known pension investors has produced a framework aimed at enabling asset owners and asset managers to maximise the contribution they can make to keeping global warming to 1.5°C.Published today for consultation, the Net-Zero Investment Framework is the first output of the Paris-Aligned Investment Initiative (PAII), which was established in 2019 by the Institutional Investors Group on Climate Change (IIGCC) at the request of European asset owners who felt that a comprehensive approach to help investors take action in support of the Paris Agreement was missing.More than 70 investor members of the IIGCC contributed to the PAII-produced framework across different working groups, and input from a wide range of stakeholders is being sought to help validate and strengthen the proposed framework.APG, Brunel Pension Partnership, Church of England Pensions Board, PKA and Phoenix Group will be putting the framework to the test across their portfolios, including with a view to assessing the financial implications. Source: European ParliamentParis Agreement signing ceremony in the European ParliamentLooking for IPE’s latest magazine? Read the digital edition here.last_img