Creating net-zero portfolios

It has been assumed that there are only three ways for decarbonising your portfolio:

  • Divestment from high-carbon industries, such as oil, mining
  • Working with companies to adopt carbon mitigation plans
  • Offsetting emissions

But, funds can do far more than all this when making new investments. A coalition of 70 funds representing assets of $16tn have designed a “net-zero” framework to remove carbon emissions across their portfolios by 2050. The framework provides a comprehensive set of recommended actions, metrics, and methodologies to enable both asset owners and managers to become “net-zero investors.” The framework identifies five core components of a net-zero investment strategy:

  • Governance and strategy
  • Objectives and targets
  • Sstrategic asset allocation
  • Asset class alignment
  • Policy advocacy
  • Market engagement.

It covers four asset classes:

  • Sovereign bonds
  • Listed equities
  • Corporate fixed income
  • Real estate