Investment consultants with USD 10 trillion of assets under advice come together to launch global ‘net zero’ initiative

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: Barnett Waddingham, bfinance, Cambridge Associates, Cardano, Frontier, Hymans Robertson, JANA, LCP, Meketa, Redington, Willis Towers Watson and Wilshire.

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.

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).

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 scenario

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.

Sarah Bernstein, Managing Principal at Meketa Investment Group and Chair of the Investment Consultants Sustainability Working Group – U.S.: “Given the urgency with which climate change must be tackled, investment consultants such as ourselves want to provide investment advisory services to support asset owners as they seek to implement investment strategies to help limit global warming to a maximum of 1.5 °C in accordance with the Paris Climate Agreement, and work to reduce our own corporate carbon footprint.  We are very pleased to be a founding member of the Net Zero Investment Consultants Initiative.  We expect our commitment to drive the development of consulting practices that will ensure an informed assessment of risks and opportunities related to transitions to net zero in the real economy are provided to Meketa clients.”