– Institutional investors have a fiduciary duty to act in their beneficiaries’ best interests and earn sufficient investment returns.
– University Pension Plan (UPP) believes that promoting healthy systems is essential for fulfilling its fiduciary duty and addressing climate change.
– Collaborative initiatives among investors can help share expertise, leverage resources, and create systemic change.
– Engaging with companies and improving climate-related disclosures can drive behavioral change and improve investment decision-making.
– Collective advocacy with policymakers and regulators can create conditions for a well-managed climate transition.
– Investor alliances and policy coordination can help mitigate risks and provide better information for decision-making.
– Joining with like-minded investors can shape the future of finance and bring about the systemic change required for a net-zero economy.
Institutional investors play a crucial role in achieving a low-carbon economy, and partnerships among these investors are vital for catalyzing systemic change. As fiduciaries, institutional investors have a duty to act in the best interests of their beneficiaries and earn sufficient investment returns. However, they also recognize the importance of stable financial, social, and environmental systems in achieving these returns.
University Pension Plan (UPP), for example, believes that promoting healthy systems goes hand in hand with its fiduciary duty to its members. When developing their response to climate change and their net-zero approach, they set their sights beyond their own portfolio. They understand that reducing emissions and managing a low-carbon transition require systemic change from all sectors of the global economy.
The transition to a net-zero economy also presents opportunities for institutional investors to build confidence, resilience, and competitiveness in the wider economy. By contributing to collaborative initiatives with the global investing community, investors can share expertise and best practices, leverage resources, and amplify their influence to create the necessary change. This collaborative effort among asset owners is one of the most effective means to catalyze systemic change and fulfill their shared fiduciary duty.
Addressing climate-related risks and ensuring a well-managed climate transition requires collective action. Institutional investors can directly engage with companies they own and external managers they partner with to set expectations and keep them focused on the transition pathway. Investors also need companies to improve their climate-related disclosures to track progress toward net-zero goals and make informed investment decisions.
Finance-led groups like Climate Action 100+ and the Institutional Investors Group on Climate Change (IIGCC) work to ensure sound science, alignment, and consistency across all member activities. By engaging with high-emissions companies and promoting a common set of objectives, these groups aim to change behavior, improve expectations, and enhance information flows for all companies and investors.
Collective advocacy with policymakers and regulators is another avenue through which institutional investors can protect and enhance value. By encouraging rules and frameworks that support the interests of their beneficiaries, investors can create the conditions for a well-managed climate transition. Joining well-established industry initiatives such as the UN-convened Net-Zero Asset Owner Alliance (NZAOA) and the Ceres Investor Network on Climate Risk and Sustainability allows investors to collaborate and amplify their voices. These initiatives represent a significant number of institutional investors and manage trillions of dollars in assets.
Partnerships and collaboration among institutional investors help navigate the evolving landscape of climate transition regulations and incentive frameworks. By joining investor alliances, investors can coordinate policy advocacy, facilitate knowledge sharing, and mitigate risks. For instance, collaborative investor groups contributed to the development of new global accounting standards for measuring and reporting climate-related impacts. These standards aim to counter greenwashing and provide investors with more information for decision-making.
In conclusion, achieving a net-zero economy requires partnership and collective action among institutional investors and investors of all sizes. These partnerships help shape the future of finance and bring about the systemic change necessary for a sustainable future. By fulfilling their fiduciary duty and engaging in collaborative efforts, institutional investors can play a significant role in building a low-carbon economy.
